NETHERLANDS - Property investment company Nieuwe Steen Investments (NSI) is considering extending its activities across the Dutch border in order to improve its returns.

"Given the extreme price level and rising interest rates, the options for growth in the Netherlands are limited. And we don’t want to acquire empty properties," executive secretary Miranda van Graas told IPE.

NSI also made clear in its second quarter results report the management board is also actively investigating the options for new real estate investment categories and value-adding activities.

As part of it new strategy, the company has already decided to make cost-cutting changes to the internal, active management of its €1.2bn property portfolio.

According to NSI, the office market is picking up in terms of volume demand, but the company noted rental levels are still lagging behind.

"Expiring rental agreements are usually followed by a continuation with 10-15% lower rents, or the provision of incentives," explained NSI.

In NSI’s opinion, a continuing recovery in the office market could also lead to a positive rental adjustment in 2009 as the vacancy rate of offices, which comprises 48% of its total portfolio, is 10.6% and its overall vacancy rate is 6.5%.

NSI’s investment in retail and industrial properties is 37% and 5% respectively, with vacancy rates of 2.8% and 0.7% respectively.

That said, a further decline in initial yields contributed to a higher valuation of its property portfolio, according to NSI as revaluation results in all investment categories were positive.

The company has made it clear it will continue to divest its residential portfolio, as direct returns are negligible while indirect returns are high.

NSI reported direct results of €23.4m, which was down €0.5m compared to the first six months of 2006 while indirect results were €35.4m.

NSI is a listed closed-end company with variable capital, which invests in high quality property in the Netherlands with a high initial yield.