Dutch office market is structurally 'under-demolished'

The Netherlands is one of the countries that is starting to offer some interesting opportunities for distressed real estate buyers.

However, health warnings apply to some segments, according to Jos Short, executive chairman of Internos Global Investors. ‘A lot of Dutch real estate is commanding net initial yields of 12-15%. But the Dutch market is structurally under-demolished. In northern Europe the most challenging market is the Netherlands.’

The industrial and office sectors are particularly challenging, he added. ‘You may be able to do a sale-and-lease back with an occupier or local heroes for assets of up to €10 mln, but beyond €10 mln, there is very little bank debt. Dutch banks were badly damaged in the crisis and the German banks have decided that the Netherlands is non-core. But the German open-ended funds are leaving so there are opportunities.’

Retail in Germany is another opportunity ensuing from the spending spree of Anglo-Saxon investors in the mid-2000s. Short estimates that some €5-7 bn of highly leveraged retail assets are due to come to the market in the coming period. ‘But,’ he warned, ‘German retail is difficult to understand. Germany doesn’t have yearly rent reviews. There are pools of opportunity, there’s a lot of activity and yields are high. But you have to look really hard at what’s going on in those markets.’