Real estate investors flock to the Netherlands
The Dutch real estate market is defying expectations. After investment volumes reached record-breaking levels in 2017, the assumption was that they would settle down this year. Instead, 2018 looks set to match or even overtake last year and prospects are bright, delegates heard at the PropertyEU Netherlands Investment Briefing, which was held on Wednesday at Dentons’ London offices.
‘Three years ago the Netherlands was lagging behind other European countries, but when the recovery came it came surprisingly quickly,’ said Oliver Kummerfeldt, European real estate analyst, Schroders. ‘It is a very interesting market because we are in the middle of an upswing and we have a good two or three years ahead.’
The seven-fold increase in investment volumes in the last five years may have surprised even the experts, but it is based on solid foundations. Investors look at the fundamentals of the country and the market: triple A rating, strong economic growth, positive demographic trends, a favourable tax regime, rule of law, high levels of liquidity, good infrastructure and transport networks.
‘The Netherlands is a very interesting market for us, a strong, diverse and resilient economy without the political complications of other countries,’ said Arvi Luoma, managing director, head of European investment, W.P. Carey Inc. ‘It will remain an attractive investment market over the long term, for capital preservation and income security, even if interest rates rise or other parts of Europe have problems.’
The transparency of the market is another positive, said Rogier Bos, real estate finance Benelux, BerlinHyp: ‘The Netherlands have such an open economy that after the crisis it was the first to benefit from global growth.’
Red carpet for investors
Local authorities deserve praise for rolling out the red carpet for investors and making enlightened, long-term planning decisions. ‘The Netherlands is open for business and extremely welcoming to foreign investors, companies and expats,’ said Asli Kutlucan, chief development officer, Cycas Hospitality. ‘The development of the airport and good transport connections were another key factor in attracting investment.’
In H1 this year the Netherlands recorded an annual increase in investment activity of 176%, according to Savills research, making the country the best performer in Europe by far, with Poland and Ireland at a distance in second (+100%) and third (+94%) place.
‘We see high levels of interest in the Dutch market,’ said Dirk-Jan Gondrie, associate partner, Dentons Boekel. ‘There is a lot of competition to buy assets and investors are willing to pay high prices.’ Foreign investors account for 60% of transactions, but their composition has changed, he said: ‘Now we see investors from Asia as well as from other European countries, not just Germany and the UK.’
Resi overtakes offices
Favourable economic conditions are driving demand for offices and not just in Amsterdam. In fact, the market is so tight in the city that occupier demand has spread out to areas on the outskirts or to other cities like Utrecht or Rotterdam, encouraged by good transport links. ‘It doesn’t have to be Amsterdam CBD,’ said Bos. ‘We like offices in secondary locations or smaller cities.’
For investors another attraction of the Dutch market is the opportunity to invest in multiple cities and markets which are connected. ‘We see the Randstad as one investable market, a megalopolis, one region rather than individual cities,’ said Luoma.
Offices have seen the largest share of investment volume for many years, but in 2018 the residential sector has overtaken offices for the first time. A combination of high population density, strong population growth and years of undersupply have created a huge demand for residential which is set to continue.
‘There is a very strong appetite for resi from international investors,’ said Gondrie. ‘There are still a number of portfolios about to be sold in the next six months and there will be competition between domestic and foreign investors.’
Dutch investors’ determination to have a presence in the market was highlighted recently by the acquisition of a €1.5 bn residential portfolio by the Vesteda group.
‘Residential is the real success story and it is in real competition with other sectors,’ said Kummerfeldt.
‘We want to develop hotels but find we are constantly competing against offices and residential for every building or piece of land,’ said Kutlucan. ‘Yields have compressed so heavily that we struggle to find the right deals. The dynamics of the market have changed, so we have to be more creative and find new locations where we can be more competitive.’