Dutch real estate transactions have reached a 10-year low, according to research from property services and research firm Savills.
A report on the Dutch real estate market from property services and research firm Savills suggests that activity is slowing as polarisation rises in the market, particularly for offices.
The report highlights the impact of higher interest rate costs on investment, the robustness of the industrial and logistics sectors, and the ongoing polarisation in office demand.
Investment volumes
Most notable in the first six months of 2023 is the volume of investment transactions, which is the lowest level recorded in the Dutch real estate market in 10 years.
Activity has fallen in response to the extraordinary spike in interest rates prompted by the European Central Bank (ECB) over the last 12 months, causing investors to exercise caution when committing capital.
Industrial strength
Despite the general slowdown in the Dutch economy, the industrial and logistics sectors remain in relatively robust health.
Even though occupier activity in logistics declined 48% in the first half of 2023 year on year, and dropped 15% in industrial, excluding logistics.
Still, vacancy rates remain low at 2.8% and 1.3%. Moreover, the report suggests that the logistics market's fundamentals, driven by growth in online retail and nearshoring strategies, remain solid in the medium-to-long term while these sectors are also supported by low levels of supply.
Office polarisation
The report also points to the continuing bifurcation in demand for Dutch office space. Despite low unemployment levels and high consumption of services, confidence among many enterprises in the Netherlands declined due to increased costs of credit and weaker economic circumstances.
As a result, cyclically sensitive enterprises are cutting costs, including office space. Nevertheless, other companies with high employee vacancies are still actively seeking attractive office accommodation, leading to a 'flight to quality.'
This has become more apparent in the first half of 2023, with core locations where high-end services industries are based remaining resilient to shifts in demand.
The report emphasises that demand for quality is reflected in take-up figures for more energy-efficient offices, with over 65% of leased space having an EPC rating of A or above.
Additionally, vacancy rates for higher quality offices decreased to 4.6% in Q2 2023, down from 4.8% in Q1 2023, while prime office rents in major cities like Amsterdam rose by 15% year on year in Q2 2023.
Clive Pritchard, head of country at Savills in the Netherlands, said: 'The Dutch real estate market is experiencing a slowdown in activity, largely driven by interest rate policies and the current economic climate.
'While overall investment volumes have seen a significant decline, the industrial and logistics sectors have demonstrated resilience due to strong supply-demand fundamentals. In contrast, the office market is experiencing bifurcation, with a clear preference for high-quality space in core locations.'
As investors adjust their strategies and focus in more detail on occupier fundamentals and asset level assessments, between, but also within different sectors.
