Government cuts to exacerbate problems in Dutch office market

Dutch government plans to drastically reduce the number of locations it occupies will add significantly to the problems in the country's office segment, real estate researchers have warned.

Real estate professor Dirk Brounen told newspaper Het Financieele Dagblad that plans to slim down the national government will lead to a 25% reduction in the office space occupied by ministries and state agencies by 2020.

Last autumn the coalition cabinet - which faces an election in September - announced it would concentrate the space occupied by its officials to 59 locations, mainly in the 12 largest cities in the Netherlands. Currently, the state occupies four million m² at 800 locations in 130 cities and towns. The state owns about 70% of the buildings and leases the rest. The rationalisation will mainly be carried out at the rented buildings by not extending existing leases.

Brounen of Tilburg University said this will result in about 1 million m² being released back on to a market which is already pressured by 7 million m² of empty space that corresponds to a vacancy rate of 15%.

'The Hague, where 550,000 m2, or 40% of the office space is being cut, will certainly suffer,' Brounen said. Periphery locations in places like Drenthe and Zeeland will also suffer.

Erwin van der Krabben, real estate professor at Radboud University in Tilburg, said the withdrawal of government agencies will lead to office owners having to offer significant incentives to attract new tenants to fill the empty space.

The government property agency Riksgebouwendiest is aware of market concerns about the office cutbacks. Eva Klein Schiphorst, the agency's real estate agency, commented in the newspaper article: 'We act responsibly and don't simply throw our buildings over the fence.'

She said the agency could in fact help stimulate the market. An example, she said, was the sale of the former government statistics agency complex in the city of Heerlen to the local municipality. The local authorities then sold the property on to a developer who is adding cultural and space for innovative businesses and students along some of the existing office space.