The Dutch real estate investment market has clearly turned the corner, writes PropertyEU’s head of Research Petra Kooijman.
The Dutch real estate investment market has clearly turned the corner, writes PropertyEU’s head of Research Petra Kooijman.
In the first half of this year, PropertyEU Research recorded a total investment volume of €4 bn in the Netherlands and market watchers are upbeat about prospects for the second half of the year. But while a structural recovery is now visible, this does not mean that the market is on course to match or exceed the record volumes registered during the boom years of 2006-07 when figures of €11-12 bn appeared to be the norm, according to Machiel Wolters, head of research at CBRE Netherlands.
Nevertheless, the signs remain auspicious. The Dutch real estate market is firmly on the radar of international investors. In the first six months of the year, no less than 60% of transactions were executed by foreign dealmakers. The growing international interest is partly being fuelled by a structural recovery of the Dutch real estate market. But the interest is also being driven by low interest rates. As a result, equities and real estate have become an increasingly attractive alternative.
In any case, there is plenty of equity splashing around. Private equity investors and fund managers are spearheading the buying spree but large institutional players like Germany’s Deka Immobilien and Union Investment Real Estate have also been fighting for the best single asset deals.
The German fund managers have made waves in the Dutch market in recent months – and years. Indeed, Union Investment appears to be sated after its recent shopping spree in Amsterdam which has propelled it to one of the largest foreign commercial property landlords in the city. In early July, the Hamburg-based company acquired the four-star Radisson Blu hotel in the Dutch capital. The price was not disclosed but PropertyEU Research has established it was around €90 mln, or €360,000 per room.
Union Investment already owns the Motel One development and 207-room Crowne Plaza hotel in the Zuidas. Including its latest hotel acquisition, Union Investment now has 774 hotel rooms in the Dutch capital. That deal followed hard on the heels of a string of office acquisitions in the Dutch capital including the new headquarters of law firm Stibbe which Union bought for €54 mln from developer Dura Vermeer.
Union Investment is also the owner of a neighbouring office development, also being developed by Dura Vermeer, for Dutch coatings specialist AkzoNobel, for €82 mln or a yield of 6.2%, according to PropertyEU Research data. And in April, it added the ITO + SOM office complex to its portfolio of assets in the prestigious business district for around €244 mln or a gross initial yield of 6.7%, according to market watchers.
GERMANS CLEAN OUT PRIME OFFICE ASSETS
Together Union and Deka have virtually cleaned out all the prime office assets up for sale in Amsterdam’s Zuidas. Indeed, Union Investment has said it has no plans for further investment in the Dutch office market although it remains interested in the logistics and industrial sector. Meanwhile Deka is believed to be looking beyond the Dutch capital after acquiring the new office development The Edge in Amsterdam at end-June.
The German fund manager acquired the project, which has been slated as one of the greenest buildings to arise in the Zuidas business district and has accountancy firm Deloitte as one of its key tenants. from Rotterdam-based developer OVG for slightly less than €200 mln for an initial yield of 6.4%. Gross rental income is put at €14 mln a year.
Based on the expected cash flow, it would seem that Deka paid a higher price than the actual value of the development. The calculation of the initial yield is based on a rental level of €350 per m2 per year. But this is not the net rental price that Deloitte will pay. Based on market sources, it may be expected that the actual rental price will be roughly 20% lower.
Rental levels in Amsterdam have remained unchanged now for some years. According to Jeroen Jansen, head of research at Savills’ Amsterdam office, vacancy levels at the Zuidas are currently 6%. This is only slightly more than the friction vacancy level. In 2009, the vacancy level at the Zuidas was still as high as 15%, a reflection of the large number of recently completed office developments at the time.
Five years later, Jansen expects that rental prices at the Zuidas are poised to bounce back again soon for the first time since 2007 and that incentives such as rent-free periods and refurbishment costs will fall. The market is much healthier now than it was just two years ago.
But Amsterdam is not the Netherlands. Indeed, the Dutch capital has a separate status in the Dutch real estate market. Yields in Amsterdam are of a very different order than those for provincial capitals like The Hague and Den Bosch. While gross initial yields at the Zuidas range between 6 and 6.5%, yields in The Hague are as much as nearly 8% in the city’s Beatrix quarter.
Petra Kooijman
Head of Research PropertyNL/PropertyEU