Project development’s image as a ‘no-go area’ is changing rapidly as investors embrace value-add in the current low-growth environment, PropertyEU's Outlook 2015 investment briefing in Amsterdam heard.

Project development’s image as a ‘no-go area’ is changing rapidly as investors embrace value-add in the current low-growth environment, PropertyEU's Outlook 2015 investment briefing in Amsterdam heard.

Thomas Beyerle, managing director of Catella Property Valuations in Germany, said the low-growth environment required a re-think of the strategies which were adopted after the financial crisis. The seasoned property analyst – who is helping to lead Catella’s European expansion drive – stressed the need to rediscover a ‘gut feeling for risk’ in order to achieve the returns their equity providers demand.

‘Value-add is more than a phrase; it’s how we create value rather than buying safe but overpriced core product. Investment managers get their bonuses at the end of the day by creating and adding value, and not by looking for 10-year leases in the centre of the city.’

Beyerle said there has been increasing talk in recent months about development – something which had been ‘absolutely no-go’ for most investors since the crisis. ‘Maybe development will become the new core – as long as it is in the city centre. This may sound strange at first, but it is realistic given the scarcity of product.’

Conversion of vacant office buildings is already a strong theme in the Netherlands. The latest example of this involved private Israeli developer-investor Omnam Investment Group acquiring The Dam, a vacant office building in the western Sloterdijk district of Amsterdam. Omnam plans to convert the property, which previously housed telecom group KPN’s offices and had been on the market for four years, into a hotel to be operated under the mid-market Park Inn by Radisson brand owned by the Rezidor Hotel Group.

Omnam paid €15.5 mln, according to the Dutch land registry. Including redevelopment costs of around €85 mln, the total investment in the property amounts to €100 mln.

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