High vacancies in Dutch market fail to scare German investors

German closed-end fund manager Real IS has reiterated plans to make more investments in the Dutch office market, despite the country’s exceptionally high vacancy levels, CEO Jochen Schenk told PropertyEU. Nationwide, the office market is plagued by a vacancy rate of 16%, running to 18% in Amsterdam and as high as 25-30% in some outlying business parks in the western urban agglomeration of the country.

While conceding that the current capital market turbulence and eurozone woes were also a source of concern, Schenk said he still felt ‘comfortable’ investing in the Netherlands. ‘There’s a huge difference between A and B locations. A few years ago, there wasn’t much core stock available but the Dutch pension funds and other institutional investors are not trading so much at the moment so we’re now seeing opportunities.’

A number of foreign investors have been scared off by reports of the high vacancy levels and practices that have favoured new developments. As a result, even buildings of a relatively recent vintage now stand vacant. A case in point is the old KPMG head office in Amstelveen. In January 2010, the advisory firm moved to a new head office just a stone’s throw away, leaving behind the 50,000 m² office building which has remained vacant since. The former head office, which is owned by German open-ended fund manager Commerz Real, is less than 25 years old. German listed office specialist IVG Immobilien owns the new office building where KPMG is now located. The high level of vacant secondary and tertiary office buildings prompted Pierre Vaquier, CEO of French property giant AXA Real Estate, to liken the Netherlands to ‘a graveyard’.

While some German open-ended fund managers like Degi (part of Aberdeen Asset Managements) and Kan-Am are liquidating their Dutch portfolios, German open-ended fund manager Deka remains upbeat about the Dutch market, managing director Wolfgang Behrendt told PropertyEU. Earlier this year, the €5 bn open-ended vehicle, which has a taste for trophy office properties, bought the Rock office tower in Amsterdam’s South Axis (Zuidas) business district for just less than €132 mln. Prospects for the South Axis look particularly promising, he added. ‘Compared to other city areas, this location proved resilient during the financial crisis, showing an impressive performance over the past three years with a total net take-up of some 125,000 m2,’ he noted. According to Behrendt, the ‘success’ of this district lies in its capacity to provide high-quality product for international companies which are willing to remain in this area despite higher rents. The overall vacancy rate in the area stood at 12% at year-end 2011, versus a city average of 18% in the same period.