Editor’s Choice: Dutch takeaways

For anyone wanting a snapshot of the Dutch property market, Amsterdam was the place to be this week with the Provada fair offering three days of vital statistics, peer networking and local market insights.

Three days may seem long for a small market like the Netherlands, but given the intense foreign interest in Dutch property – and a rash of international deals - in the last two years, visitors and exhibitors alike may have been all too happy with the time.

This year there was even an International Business Lounge – cohosted by PropertyEU - to cater to the international visitor, with a series of English-language discussion panels and networking events.

Good numbers
We learned an awful lot about where the Dutch market is headed, what to invest in and where. The economy is – still – on an upward trend with GDP growth forecast to come out at between 1.5% and 1.7% this year following four consecutive quarters of growth. With it, consumer confidence and spending are rising, which is good news for retailers – and retail investors. According to CBRE and Savills, there are a number of office, logistics and retail portfolios hanging over the market which will trade this year. Research by Savills suggests there are no less than 20 portfolios with a combined value of €2.8 bn being offered, and for which international interest is strong.

As one panellist during PropertyEU’s Netherlands Investment Briefing put it, Dutch retail is now the ‘perfect play’ with investors looking at both the core and opportunistic side of the spectrum. His views were backed up by new research released at the fair which highlighted smaller convenience centres in urban hubs - essentially neighbourhood grocery stores – as a good bet where yields of 7% can be achieved.

The shift to retail follows two years during which offices and residential grabbed the limelight as international investors sought to capitalise on attractive prices compared to other core European markets. Thanks to this resurgence of interest, total transaction volumes topped €10 bn last year, double the 2013 figure. Amsterdam’s Zuidas business district has seen all its prime offices snapped up by German investors while the more distressed side of the market has gone to bargain hunters of the likes of Blackstone and Lone Star.

Tricky residential
Residential is a more complex story. The market saw two major social housing portfolios go to foreign investors (Patrizia and Round Hill) last year after government moves to deregulate the sector opened it up to foreign capital. Again, the attractions of entering the Dutch market – previously a strictly domestic preserve - were buying property in a recovering but stable market where better prices are still to be had than in other countries. And, importantly, where the demographics and economics will guarantee solid future income.

But for those foreign investors seeking to get their hands on more Dutch homes, the simple message from this year’s Provada was: there aren’t any. At least, not ready-made portfolios of existing stock with a ‘critical mass’ of 2,000 units or more. Most of the portfolios still held by the housing corporations are highly fragmented in terms of rent bracket and location – and, as one panellist put it, ‘not very attractive at all to a foreign investor for that reason’.

Another myth dispelled by a panel of Dutch housing experts was that the corporations (who own a staggering 2.4 million homes!) are financially distressed and therefore under pressure to sell. With two notable exceptions – Vestia and WIF – most have got, or are getting, their finances in order following the crisis. And, to redress the imbalances in their portfolios, many are trading with one another.

So, investors take note: don’t expect any fire sales in the short term. And for those who insist on sticking with residential, the only way to access product is to create it. ‘We need one million new homes in the Netherlands,’ said the government’s director-general for housing Mark Frequin. Demand for new housing in the middle segment in particular (rents of €700-1,200) is ‘enormous’, he said.

Some foreign investors have already picked up the gauntlet and are seeking to source product through forward-funding structures. Germany’s Patrizia Immobilien is a case in point. After acquiring 5,500 homes last year in a €578 mln deal, the company recently struck a deal with the authorities in The Hague under which it will fund the development of 150-200 new homes a year.

Global megatrends
Among all the minutiae on the Dutch market, there was also room at the Provada for a broader global picture. Two separate sessions hosted by non-profit organisations ULI Europe and RICS lifted the focus to a level well above the Dutch lowlands. Both took on the rather ambitious task of examining the ‘megatrends’ and ‘unprecedented future change’ set to affect the real estate industry in the decades to come.

Not surprisingly, there was a great deal of overlap between the two, with rapid urbanisation, demographics, sustainable cities, technological change and the need for strong leadership emerging as some of the common denominators. In both sessions, the audience was bombarded with a dizzying array of statistics on the dramatic change our world is set to undergo.

Some of the numbers – such as that over 50% of the world’s population currently lives in cities – are trawled out regularly and familiar to many. Others are less well known, but no less impressive. We learned, for example, that by 2030, more than 50% of urban growth will come from just seven countries: India, China, Nigeria, Indonesia, the US, Pakistan and Congo. Of this group, China and India will contribute more than one-third of the total growth. Another statistic: within the next five years, the global middle class will grow by 75%, again mostly in emerging markets.

All this, we learned, will have huge consequences for the balance of economic power in the world, infrastructure, city density and resource management. And ultimately, for the built environment in all its forms. The 'great urbanisation wave' will unleash a 'race for space' in the world's largest cities, creating demand for housing, retail and offices. It may all seem rather remote now, but sooner or later, these long-term shifts will trickle down to the drawing boards of urban planners, architects, property developers, investors and managers. Basically, anyone involved in real estate - so everyone who attended this week's Provada.

Marianne Korteweg
Managing editor