Economic and real estate fundamentals in the Netherlands are looking very attractive but the country's relatively small listed real estate sector is not overly bullish on prospects for 2017, EPRA's Insight event in Amsterdam has heard.
The main difficulties, according to the expert panel, are volatility in the stock market; the retail sector which has yet to fully recover; and the Dutch REIT system FBI, which although older is not as flexible as some of the younger structures operating in other European countries.
Currently, the four domestically quoted Dutch companies in the EPRA Developed Europe Index have a market capitalisation of about €5 bn. As a result the Dutch are now ranked eighth behind Belgium and slightly above Austria.
The Amsterdam Insight meeting was hosted at the offices of law firm Loyens & Loeff on 12 January. The event came days after the first 2017 event held by the European Public Real Estate Association (EPRA) in London.
The Dutch meeting was notable for the lack of mention of Brexit or the election of Donald Trump as US president except for occasional references to 'geopolitical risks'. Nevertheless, moderator Remco Simon, director of research at Kempen & Co, set the tone for the Dutch event early on when he asked the panel whether they were 'bullish' on 2017.
He framed the question in the light of positive European and Dutch figures for investment volumes, yields, total returns as recorded by the EPRA indices and capital raising over the last five years. For the Netherlands, he cited CBRE figures which put investment volumes for the Dutch market at €13.5 bn in 2016, ahead of the record set in the last peak year of 2007. Also, Dutch prime office yields have moved in to 4.25%, well below levels in the previous peak. 'This afternoon the yield on 10-year Dutch government bonds was 0.4%, down 30 basis points year-on-year. This is a far cry from the 4% at the peak of the previous real estate cycle,' he said.
Stock market volatility
In response, Evert Jan van Garderen of Eurocommercial Properties, the Amsterdam-listed European shopping centre landlord, noted that the volatility in stock prices remained an issue of concern even though cheap debt continues to be available.
Patrick Kanters of APG Asset Management also resisted feelings of euphoria. 'If you bombard me with all these nice numbers I get a bit scared as we have heard all this before,' he said. Kanters added that he was cautious in relation to cap rates, while also noting that 'from an operational perspective most markets are well positioned to generate further cash flow'.
Bullish sentiment, according to Bernd Stahli, CEO of office investment company NSI, may be more applicable to other European markets. 'Anyone who has been investing in Dutch property has not felt that level of optimism over the last couple of years. It's been a long down cycle; the office market only started to turn in 2014 and retail is still a soft market'.
Stahli said there was a disconnect between the listed sector and private real estate owners who tended to have a more positive view of the market over the last few years. That said, Stahli also recognises there is improvement. 'There are positive signs the economy is picking up. Life ain't too bad in that respect and we can see that in the transaction volumes which lead the recovery in the occupiers' market. We are also seeing this in terms of take-up. There is life in the Dutch market, but it's been a long down cycle.'
