EPRA INSIGHT: Dutch market has bright spots amid ongoing gloom

The Dutch real estate market has seen a sharp increase in investment transactions in recent weeks but this does not necessarily herald across-the-board recovery.

As three major office schemes have changed hands in Amsterdam's South Axis district, panel moderator Bart Gysens, executive director at Morgan Stanley, tabled the obvious question during EPRA's Insight Amsterdam event this week: has the much maligned Dutch offices turned the corner and was it time to increase exposure to the sector through direct or indirect channels?

The panel's response was cautious, to say the least.

PRIME POCKETS
Rafael Torres-Villalba, head of listed real estate for Europe at asset manager APG, for instance, said answers would depend on which part of the Dutch office market someone was involved in. The recent office deals on the prime side of the market (see links below), he said, suggested confidence was returning, put only in certain pockets of the market. APG recently increased its exposure to offices along with other investors as Australian property group Investa sold its 13.5% stake in the Dutch Office Fund for €155 mln. The unlisted DOF fund is managed by CBRE Global Investors. 'We were one of the existing investors who increased their stake and we are confident of our entry price and of getting the right returns.'

Jaap Gillis, CEO of fund manager Bouwfonds IM, said the Dutch office market has been overbuilt since 2008. The sector had a vacancy rate of about 6% in 2000, which rose to about 10% when the first IT bubble burst. Vacancy dipped again in the good economic climate during 2006-7 only to grow again to its present level of around 15.7%.

But there were more issues at play than just overbuilding and pure economic performance, Gillis said. The Dutch office and retail property sectors also face technical issues resulting from the rise of the internet and related consumer spending and working patterns. 'We have to ask ourselves: is the problem because of the economy only or is it because people need less space? When people move they take up 40% less space. So for a lot of offices the crisis has not finished yet, but for the prime spaces like in South Amsterdam prices are increasing again.

Offices, like residential and retail, Gillis said, had 'good' and 'bad 'assets and locations and 'not much in-between'. 'But I think there are a lot of good opportunities and if you follow the market correctly you can do some good deals'.

BNP Paribas Investment Partners believes it has found a good investment in Amsterdam-listed Nieuwe Steen Investments (NSI). Jan-Willem Vis, chief investment officer global listed real estate at BNP Paribas Investment Partners, said: 'We took a big stake in NSI in the recent placing after really doing our homework. On the whole in the Netherlands current valuations still have some room to drop and we are not there yet, certainly at the lower end of the market. If you put it in global perspective I think the risks will be severe in Holland.'