DUTCH BRIEFING: Secondary and vacant offices come in from the cold

The Dutch market is still struggling with a legacy of over-build in the boom years, but there are signs that recovery is on the horizon.

That was one of the conclusions at PropertyEU's latest investment briefing on the Netherlands. One of the most striking signals was that market professionals are now opting to invest in secondary and high vacancy offices - the bête noire of the country's real estate downturn.

A year ago, panellists at a similar briefing were asked how they would spend a notional €100 mln in the Netherlands. This year the figure was increased to €500 mln, but the consensus was that the higher figure was 'a lot of money' relative to the size of the market. This concern, notwithstanding, several sectors and strategies were outlined.

BACK TO OFFICE
Two of the panellists at the event, hosted by CBRE Global Investors in London championed the much maligned office sector.

Erik Langens, senior director, Dutch capital markets at CBRE, said he would put a large part of the money in empty or half-empty offices buildings in the central business districts of the largest cities in the Netherlands. 'I think this sort of property could be acquired for a good price and this risk would be low because demand from occupiers is increasing.'

An interesting strategy, Langens said, would be to attract occupiers from business parks on the edge of metropolitan area back into the inner city.

Panellist Michael Walton, CEO of Rydna Property Investors, singled out secondary rather than prime office stock. 'Our overall assessment is that the prime markets in the Netherlands are too expensive. We see a lot of international capital has come in and those yield shifts in those prime areas has been very rapid.'

'I would focus on secondary offices where the yield shift has not yet taken place,' Walton said. Very precise due diligence would be needed to identify the right assets, he said. Another important factor would be to factor in the higher costs associated with the very intensive management required to run such a portfolio.

RESIDENTIAL AND RETAIL
Retail property - another weak component of the Dutch market in recent years - would also benefit from the panel's largesse.

CBRE's Langens said he would wait for a few more months to see how retail develops before investing the fictional sum. 'By then the book values will have come down and owners might be more willing to sell their retail portfolios at a more acceptable market level. There is some vacancy now but I think retail has been one of the strongest sectors over the years.' Logistics and student housing, he added, would also get some of his money.

Robert Dijckmeester, board member of Zuidas, Amsterdam would put aside €100 mln for a new museum in the Dutch capital as part of a strategy to invest in real estate that made the city more attractive to locals and visitors.

Sabina Kalyan, global chief economist & head of European research at CBRE Global Investors, outlined several strategies: residential for high-yielding and stable income and investing in next generation cross-dock logistics. 'Then I would invest some of the money in debt, as relative to the UK and Germany there is still some juice in the Dutch market.'

Boris van der Gijp, director strategy & research at Syntrus Achmea Real Estate & Finance, also proposed a three-way split. A third, he said, would be devoted to a value-add strategy of acquiring bigger development projects in big cities in the north part of the Randstad conurbation, such as the Zuidas and Houthavens in Amsterdam.

'One third would go to core investment in the residential market which offers a high return at a really low risk. Snytrus invested €850 mln in this sector last year and we had some really happy clients.' The rest of the money would be assigned to housing that is combined with healthcare because this represented a very interesting opportunity in the long run, he added.

Click on the link for more on the Netherlands Investment Briefing