NETHERLANDS BRIEFING: Dutch investment on track to exceed €10b in 2015

Last year’s surge of investor interest in the Dutch real estate market was not a flash in the pan, attendees at PropertyEU's one-day Investment Briefing on the Netherlands heard in London on Monday.

Investment volumes this year are set to match or even overtake 2014’s robust figures, experts told the full-day briefing at CBRE’s City office.

‘Investment is growing and there is a lot of interest in the market from both local and foreign players, so last year’s €10bn figure will easily be reached at the end of 2015,’ said Boris van der Gijp, director of strategy and research at Syntrus Achmea Real Estate and Finance.

‘We have seen rising investment volumes and a growing share of foreign capital,’ said Michael Hesp, head of Netherlands strategy and research at CBRE Global Investors. ‘The market is showing positive momentum thanks to good economic data, GDP growth and high consumer confidence. Yields have room for further compression because they have not come down to the extent that they have in other European countries.’

While traditionally foreign investors have been German, British or French recently Israeli, US and Asian investors have come to the fore. ‘This is a totally new phenomenon,’ said Arnout Scholten, partner at CMS.

The problems facing investors now are more competition, and the increasingly limited availability of investment opportunities, especially in prime areas. Demand has been high and highly skewed towards prime locations, so good quality assets can be hard to buy.

Investors advised to move up the risk curve
‘Moving up the risk curve is the answer,’ said Van der Gijp. ‘Look at larger-scale projects, areas in the process of gentrification, alternatives like healthcare or residential mortgages, Abba (A buildings in B locations or B buildings in A locations).’ To find the opportunities and clinch the deals, experts agreed, good local knowledge and a strong on-the-ground network are essential.

Last year the residential and retail sectors attracted the bulk of investments, but this year the office sector is seeing the strongest recovery, Hesp said: ‘Demand is set to improve further, as the business services sector is seeing a widespread upturn.’

Once again, interest is focused on the best locations, as 20% of total demand for offices is in Amsterdam and 40% in the G4 cities (Amsterdam, The Hague, Rotterdam and Utrecht). ‘In the best locations there is hardly any supply and in other locations there is no demand and vacancies are still high,’ said Van der Gijp.

The residential market has also bounced back, as urbanisation and a growing population fuel the demand ,not just in the G4 but in all the 15 main cities in the Netherlands. The government estimates that 200,000 new homes will be needed between now and 2020.

Demand for rental housing
‘In Amsterdam alone, 500,000 m2 have been converted into residential and this trend will continue,’ said Bart Verhelst, executive director, Capital Markets at CBRE. Local authorities have streamlined the planning process to ease the path for investors.

The Dutch government has deliberately opened up the rental market to attract more competition, even if it meant treading on a few toes, as Stef Blok, minister for Housing and the Central Government Sector, explained: ‘We are selling off state property and have reformed the rental system, reducing the strong rent protection which gave people little incentive to move.’

The reforms are designed to push the social housing sector, which is far bigger in the Netherlands than in any other EU country, to concentrate on affordable housing and dispose of the more expensive, high-end part of their portfolio. This process of gradual divestment, as well as the sale of government properties, is opening up interesting opportunities for investors, said Blok: ‘If you have stamina, it is a very good way to collect a portfolio.’