Sector overview

Logistics remains number one Like last year, logistics remained the largest investment sector in the Netherlands: investment volume reached €2.9 billion, accounting for 39% of total investments during the first six months. The main driver is the steady increase in online consumer spending. The high demand for logistics space has created a significant need to expand the real estate supply, and vacancy rates have fallen to a historically low level of 3%. At the same time, opportunities for expansion for new logistics space are declining due to a lack of available land and more stringent regulations. The combination of these trends is driving the current increase in rents.

Shopping centres are fuelling a revival in retail real estate However, we are seeing the most striking trend in the retail investment market, where investment volume is up €1 billion from last year (2.5 times higher). The sale of the Citymall shopping centre in Almere and the Makado shopping centre in Beek both play a key role here, accounting for a combined total volume of €211 million.

This also characterises the revival in the market for ‘non-convenience’ shopping centres and high streets. These have been difficult products to sell in recent years, as a result of lower rents and looming vacancy. CBRE notes that prices are stabilising in this sector, with vacancy rates even falling in many locations, due to conversions and other factors. Known operational risks have been factored in, and these types of shopping centres are becoming more marketable again,

while shopping centres in general also remain popular for everyday shopping needs and grocery shopping. Investor demand in this segment actually continues to increase. Investment volume per transaction is largely within the reach of private investors, limited partnerships and institutional investors; the resulting fierce competition is reflected in the prices.

Slight recovery in the office investment market Supply in the office market has increased from last year, as office buildings have been prepared for sale in recent years by optimising their operations. At the same time, rising interest rates are resulting in lower prices. CBRE sees this especially at offices in core locations where the leverage effect of financing has disappeared within a few months. As a result, larger offices in particular have become less liquid. We also see the same effect at secondary locations, because properties there are more often purchased with a larger share of debt. The fact that investors have more investment options means they are becoming more selective in their acquisitions, and, increasingly, one of their criteria is the extent to which the buildings are aligned with the EU Taxonomy.

Since many acquisitions are currently made with more equity capital, we are seeing a decline in total investment capacity in the office market. Although, at €1.1 billion, total investment volume is lower than projected, we are expecting the office market to reach a new equilibrium over the summer, though this is based on the assumption of stabilising interest rates. Many investments are, then, set to go ahead in the autumn.

Uncertainty regarding regulation detrimental to development in mid-market real estate The residential investment market improved slightly from last year, although investment volume – €1.6 billion during the first and second quarters of 2022 – remains lower than the banner years of 2018-2020. An added factor is that the second quarter was characterised by policy changes, particularly the impending regulation of mid-market rental homes: there is a risk that the Dutch government will opt for full regulation of rents in this end of the market (affecting both initial rents and subsequent indexation).

This risk has directly impacted the investment volume of new developments; in fact, it has occurred only twice in the past seven years that the volume for new homes was as low as in the past quarter. The change itself – and the lack of clear information around the topic – is already causing a substantial price decrease, particularly for mid-market rental homes with floor areas of up to 70 square metres. At the same time, there is a substantial demand for smaller rental apartments, a development product that is very prevalent in urban development plans.

Investment volume by quarter in new developments in the Netherlands

Source: CBRE Research

We expect that the potential introduction of this regulation, along with the current high construction costs, the increase in local exploitation obligation, and various building requirements are putting a halt to a large number of new developments. Projects will simply no longer be financially viable in the immediate future, and this will be followed by an impasse and a reduction in construction output. The outlook is more optimistic over the long term, as the Dutch residential market remains appealing to domestic and international investors. It is mainly the uncertainty and fickleness around future regulations that is causing the current reluctance among investors.

Cooperation is key in the healthcare investment market Demand for healthcare investments remains consistently high, which is resulting in a growing number of new alliances between healthcare institutions and investors. A case in point is the Siza foundation, which sold twelve of its residential care facilities as part of a sale-and-leaseback transaction. This allows these institutions to focus on their core competency of providing high-quality care, while investors can start thinking about renovations, sustainability and new real-estate developments. These types of partnerships make it possible for the partners to focus on the significant quantitative and qualitative challenge we face when it comes to assisted-living facilities. We expect a growing number of healthcare providers to be interested in these types of partnerships. Healthcare investment volume for the first six months was at the level expected: nearly €400 million.

Hotel real estate is back, while also facing new challenges The Dutch hotel market is recovering significantly faster than expected. Tourists have returned to the Netherlands, bringing room rates and occupancy rates back to their pre-Covid levels. This trend carried over to the hotel investment market at the start of the year, where the mood was likewise optimistic. However, we will need to adjust this forecast as a result of the higher interest rates and sharp increase in energy costs. Overall, CBRE is expecting investment volume of €600 million by the end of the year; currently, at the mid-year point, it hovers at €200 million.