2001Real Estate
Situation : the Netherlands |
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Piet J. Korteweg
Department of Applied Geography and Planning
Faculty of Geographical Sciences
Utrecht University
The Dutch real estate markets are at their top now, but recent
and ongoing cyclical changes in the economy and supply-factors
will contribute to another market situation. The long term structural
and spatial changes - growth of the real estate markets and also
growth in other parts than the core area of the country - will
continue. In this paper some characteristics, the actual situation
and the short and long term changes of the office, the industrial
and the investment markets are treated.
The office market
The Dutch office market has a size of 38.000.000 m? and is composed
of a segment which is owned and used by the same firm (owner-occupier
sector) and a segment which is called the 'free market'. The 'free
market' in the Netherlands, which is mainly the market for rent-offices
where property developers and institutional and private investors
are active as principals, has a history of nearly 40 years and
now encompasses about 60 % of the total stock of office space and
75 % of the transactions of the total market. The following mostly
concerns the free market, the segment where also the valuers are
most active.
The demand on the office market is at the top
now. In the last years there was a tremendous increase in take
up (figure 1), based on the economic growth and especially by the
demand of the ICT-sector and business services and despite the
fact that the growth of office firms was slowing down in recent
years through scarcity on the labor market. The supply of new office
space started only very slowly in the last part of the nineties,
after a period of oversupply and large vacancies in the first part
of the nineties (figure 1). Because of that the property developers
were cautious for years in building on risk. They preferred long
time to start mainly pre-let projects. In the last few years the
growth of the take up of office space was even restricted by the
insufficient supply of new office space (1999). The resulting large
increases in rents in recent years triggered property developers
to start office projects on risk. But in the perspective of the
slowing-down of the economic growth and the scaling down of firms
in the ICT- and other sectors it will be possible that the delivering
up of this office space will in the near future contribute to a
crisis on the office market, like in the beginning of the eighties
and nineties. Despite the large increases in recent years, even
in the prime office locations of Amsterdam and Amsterdam Schiphol
Airport the rents are still much lower than in large European cities
like London and Paris.
The cyclical development of the office market
in the last decades is represented in the patterns of take-up and
demand. For the near future a reversal in the market is expected.
But on the long term a continuing growth of the size of the Dutch
office market is expected, by the continuing change of the structure
of the Dutch economy, to a service and especially an knowledge
economy. This trend is not only illustrated in the growth of the
office stock (40 % from 1989 till 1999), but also in the path of
the take-up of office space (figure 1). Besides the cyclical trend
of the take-up, on the long run there is a trend of an increase
of the levels of take up. Consequent on the continuing change to
a service economy for the future a further increase of the demand
for office space is expected, but at an decreasing rate of growth,
through a diminishing growth of the labor force.
Figure 1 The Dutch office market
Source: Vastgoedmarkt
The Dutch office
market is concentrated in the Randstad
Holland, the area of the four largest
urban agglomerations which is encircling
the 'green heart' in the western
part of the country. The office
markets of these agglomerations
have by the composition of their
economy a different function in
the Dutch office sector and a different
size (table 1). The four office
markets are still growing, but,
by congestion in the Randstad and
by autonomous economic development,
office development is also taking
place in different medium sized
cities along the major highways
from the Randstad to the south
and the east, which are also important
connections to the rest of Europe.
Table 1 The
largest office markets of the
Netherlands
| Urban agglomeration |
Function in Dutch economy |
Office stock
(m2 lettable floor space)
|
Maximum rents (Dutch guilders) |
| Amsterdam |
International and financial
center |
5.800.000 |
800 - 950 |
| The Hague |
Government center |
5.366.000 |
425 |
| Rotterdam |
Harbour and industrial activities |
3.471.000 |
425 |
| Utrecht |
National office center |
2.868.000 |
500 |
Source: Dynamis
The industrial market
At the industrial market, which has a size of 40.000.000 m2, the
segment of the owners-occupiers is about 80 %. The actual trend
is that the proportion of the free market, which is mostly a rental
market, is increasing by developments at the demand and supply
side of the market, to 30 % in five years. More space demanding
firms want to invest only in their core activities and they want
to be flexible with regard to the adjustment to their space demands.
Sale-and-lease-back is an important process at the Dutch property
markets. The industrial market has become more attractive to investments
and exploitation by real estate investment institutions through
the larger demand for standardized space, especially in the form
of hybrid industrial buildings, which have a large component of
office space. In this regard also the space demand for the growing
logistic sector is important.
In the last years the take-up and supply of industrial space is
growing (figure 3). The structure of the free industrial market
is characterized by large component of older buildings, most of
which were transferred from the sector of owner-occupiers. So in
the supply of industrial space of the last ten years more than
90 % are existing buildings. While a large part of these buildings
don't match with the desires of the industrial and logistic firms,
there is actually scarcity on the industrial market. There is to
few development of industrial space on risk, also while there is
scarcity of terrain for industrial uses. The industrial market
is more dispersed over the country than the office market.
Figure 3 The
Dutch industrial market |
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| Source: DTZ Zadelhoff
The investment
market
The Dutch investment market in commercial real estate was increasing
in the last few years. In 2000 8.800 million Dutch guilders was
invested in offices, shops and shopping malls and in industrial
and mixed real estate by pension funds, insurance companies, quoted
property companies and investment companies from other countries.
That last category had an proportion of 30 till 45 % in the last
years. The proportion of offices in the total of 2000 was 73 %,
of industrial real estate 10 % and shops and shopping malls 17
%. In the Dutch investment sector the following developments are
going on: enlargement of scale, internationalizing and separation
of asset management and property portfolio management. In the mid
of the nineties a benchmark of real estate returns was created.
On the basis of the work of valuers the returns of investment in
real estate of Dutch financial institutions and quoted property
companies in the Netherlands are presented (table 2). The property
returns were on a high level in the last six years. But the high
level of the all property total return in 2000 is based on the
increasing return of the residential sector. The returns of the
other sectors are decreasing. The changing conditions on the real
estate markets have their impact on the yields (table 3). In recent
years the yields have been on a low level, but now there is some
stabilizing and in the office sector an upwards movement.
Table 2 Total
return of property in the Netherlands
of Dutch financial institutions
and quoted property companies
| |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
| Retail |
9,0 |
8,8 |
10,6 |
12,6 |
13,3 |
12,0 |
| Office |
8,6 |
8,8 |
11,9 |
14,4 |
15,8 |
15,1 |
| Residential |
14,5 |
14,8 |
14,2 |
14,6 |
18,5 |
19,5 |
| Industrial |
9,8 |
12,7 |
12,9 |
13,6 |
17,2 |
13,2 |
| Mixed use |
11,4 |
8,1 |
10,6 |
15,6 |
16,0 |
18,0 |
| All property |
11,9 |
12,0 |
12,9 |
14,2 |
16,6 |
16,6 |
| Equities |
19,8 |
40,3 |
44,9 |
22,3 |
30,6 |
-2,1 |
| Property equities |
-3,7 |
30,7 |
13,6 |
11,4 |
10,1 |
7,1 |
| Bonds |
17,2 |
8,0 |
6,3 |
10,6 |
-1,5 |
7,6 |
Source: ROZ/IPD
Netherlands property index
Table 3 Yields
of commercial real estate in
the Netherlands
| |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
Offices in Randstad: prime
locations
|
7.00 |
7.50 |
7.80 |
8.25 |
8.25 |
8.25 |
8.25 |
8.00 |
7.25 |
7.00 |
7.25 |
7.30 |
| Offices in Randstad: other
locations |
7.50 |
8.75 |
9.25 |
9.25 |
9.50 |
9.50 |
9.25 |
9.00 |
8.25 |
7.75 |
8.50 |
8.50 |
| Offices outside Randstad:
prime locations |
7.50 |
8.25 |
8.50 |
9.00 |
9.00 |
9.50 |
9.25 |
9.00 |
8.25 |
7.75 |
8.40 |
8.50 |
| Offices outside Randstad:
other locations |
8.25 |
9.25 |
9.50 |
9.50 |
10.00 |
10.50 |
9.75 |
9.75 |
9.00 |
8.50 |
9.00 |
9.00 |
| Industrials in Randstad:
prime locations |
8.25 |
9.50 |
9.75 |
10.25 |
10.25 |
10.25 |
10.00 |
10.00 |
9.00 |
8.50 |
8.50 |
8.50 |
| Industrials in Randstad:
other locations |
9.00 |
12.00 |
12.00 |
12.00 |
12.00 |
12.00 |
11.00 |
11.00 |
10.00 |
9.50 |
9.25 |
9.25 |
| Industrials out- side Randstad:
prime locations |
8.75 |
11.00 |
11.25 |
11.25 |
11.25 |
10.25 |
10.25 |
10.25 |
9.50 |
9.00 |
9.00 |
9.00 |
| Industrials out-side Randstad:
prime locations |
9.75 |
12,50 |
12.75 |
12.75 |
12.75 |
12.75 |
11.50 |
11.50 |
10.50 |
10.00 |
9.50 |
9.50 |
| Shops in Randstad: prime
locations |
7.0 |
7.75 |
7.75 |
8.00 |
8.25 |
8.50 |
8.50 |
8.50 |
7.75 |
7.75 |
7.25 |
7.25 |
| Shops in Randstad: other
locations |
7.50 |
9.00 |
9.50 |
9.50 |
9.50 |
9.50 |
9.50 |
9.50 |
8.75 |
8.50 |
8.50 |
8.50 |
| hops outside Randstad: prime
locations |
7.0 |
8.50 |
8.75 |
9.00 |
9.00 |
9.00 |
8.75 |
8.75 |
8.00 |
8.00 |
7.25 |
7.25 |
| Shops outside Randstad: prime
locations |
8.0 |
9.50 |
10.00 |
10.00 |
10.00 |
10.00 |
10.00 |
10.00 |
9.00 |
8.75 |
8.50 |
8.50 |
Source: DTZ Zadelhoff
Conclusions
The real estate markets in the Netherlands are still in the expansion
phase of the property cycle, but the top level is approaching,
especially in the office sector. It is expected that the downturn
in the office market will be fewer extreme than in the beginning
of the nineties, while the property developers were reserved
to invest in new buildings without pre-let contracts. For the
long term the Dutch office and industrials markets will grow.
In the Dutch investment sector the processes of enlargement of
scale, internationalizing and separation of asset management
and property portfolio management will go on. |
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