Savills Netherlands
Market in Minutes
Autumn 2024
Modest Signs Of Recovery In Activity And Sentiment
Investors welcomed the successive rate cuts by the European Central Bank, as the transaction market has been subdued since the end of 2022. Although Q3 investment volumes increased, they were considerably below trend levels (34% lower than the previous 10-year average), still pointing towards a slow investment market. The cuts are also likely to be well-received in the broader economy. The Dutch economy is sending out mixed signals, enjoying positive GDP-growth (+1.0%YOY) in 2024 Q2, but experiencing a decline (-3.2% YOY) in industrial production in the same period.
All the while, inflation remains persistently high (+3.3%) in the Netherlands, especially compared to other countries. Hence, companies are largely applying the brakes, with Q3 being the second-lowest total take-up in the last five years in the Dutch occupier market. All the while, underlying trends are influencing occupier markets differently across sectors, with a varying picture in occupier activity in Q3 2024 as a consequence. This Market in Minutes report explores occupier and investment activity in Q3, considering how the economy and interest rate environment impact sentiment in the Dutch real estate market.
The Dutch Economy
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Women’s needs
Unlocking value
male dominance in real estate shapes biased urban design
are overlooked due to underrepresentation in data
by bridging the gender gap in real estate
Signs of Recovery
Introduction
Outlook
Occupier Market
Investment Market
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This Report
Contents
Claude Debussylaan 48, 1082 MD, Amsterdam +31 (0) 20 301 2000
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Savills Beds Special 2024
Dutch Life Sciences
The Office Market of the Future
Logistics Confidence Index 2024
Market in Minutes Q1 2024
Other Reports
Occupiers are cautious about taking up more space, prioritising issues such as addressing labour shortages and sustainability over expansion. Within the Industrial and logistics market take-up decreased with 15.56% YOY and 14,82% YOY, respectively, reflecting increased selectivity about the location and quality of space they choose. Office market take-up decreased 36% YOY, with the debate about working from home versus in the office intensifying. The retail market had the smallest decline in take-up of 6% YOY and has become the most stable commercial real estate sector.
Occupier Market Selectivity
Investment Volumes Rise
Total investment volumes were up 30% YOY, with investment in the first three quarters of 2024 almost matching the total volumes for 2023. Larger deals based on core strategies were still largely absent, however. Institutional investors clearly show less apetite for investing in real estate in general, with average times to close new funds increasing to 22 months in 2024 from 13 months in 2020.
Key Findings
The ECB has shifted away from a "wait-and-see" strategy with a third interest rate cut in 36 days after the last one, bringing it to 3.25% amid easing inflation concerns. In the Netherlands, inflation remains high, driven mainly by strong wage growth and price increases in goods, services, and food, despite falling energy costs.
The Dutch economy is showing signs of modest recovery, with GDP growth of 0.8% YOY in Q2, with rising exports signalling improving economic conditions.
ECB Lowers interest Rates
with retail seeing a 6% YOY decline.
Occupiers focus on sustainability,
Invisible Women in Real Estate
1
2
3
BAck to the top
The Dutch economy
No longer Wait-and-see
After the interest rate ‘shock’ between July 2022 and September 2023, the ECB now prioritizes a soft landing
Rate hikes between July 2022 and September 2023 contributed to a ‘shock’ in the real estate market. The magnitude of the interest rate increases and the speed at which they followed each other let to a virtual halt of real estate activity. The current cuts are being carefully timed and should act as a catalyst to get the real estate market moving. Guided by occupier fundamentals, a modest recovery in sentiment and activity is already visible.
The ECB Abandons Its “wait-and-see” Approach, as Inflation Worries Ease
The deposit facility rate and its date of changes
The ECB cut interest rates by 25 basis points to 3.25% for the third time in Q3, 36 days after its previous cut, as concerns about economic contraction prevail over inflation. Wage growth appears to be stabilising in the Eurozone, causing inflation to move faster towards its target and allowing the ECB to abandon its previously “wait-and-see” approach. There are already signals another interest rate cut will follow in December.
The European Central Bank (ECB) cut rates by 25 basis points to 3.25% for the third time in Q3, prioritizing growth concerns over inflation.
3rd
36 days
Since the previous cut
Rate cut in Q3
Source: ECB
Dutch Inflation Higher Compared to Europe
In September 2024, the Netherlands’ HCIP-adjusted inflation was 3.30% YOY, which is relatively high compared to other Eurozone countries. The main contributors were goods and services (+5.6% YOY) and food, drinks, and tobacco ( 6.0% YOY), while energy prices fell (-6.1% YOY). Consistently high wages in the Netherlands (+6.7% YOY) continue to push up the prices for goods and services, offsetting some of the loss of purchasing power experienced by consumers. In addition, cooling energy prices have improved consumer and business sentiment, which is especially relevant to the industrial and logistics markets. Most notably, for the first time in five quarters, GDP grew with 0.8% YOY. Goods and services exports increased 0.4% YOY in 2024 Q2, with increased exports of chemical products, food and beverages, and machinery and equipment. In contrast, imports of goods and services were down 0.6% YOY.
HCIP- adjusted Inflation rate in the Netherlands compared to other Eurozone countries
Source: Eurostat (2024)
Occupier market
Stable Vacancy Rates and Low Take-up Reveal Occupier Markets Are at a Standstill
The poor business climate contributed to weaker total take-up in Q3, down 21% compared to the previous 5-year average. Take-up across the leading commercial real estate sectors decreased by 18% YOY in Q3 2024, reaching 1,427,885 sq. m. in total. Generally, businesses are consolidating their space requirement, staying put and waiting for the economy to improve.
In turn, companies are focusing on increasingly pressing business matters, such as addressing labour shortages and sustainability. In the logistics market for example, Savills’ recent logistics census found that 69% of occupiers expect more stringent ESG targets / regulations to be game-changing for the properties they are using.
18% Drop
Take-up fell 18% YOY in Q3 2024.
69% of logistics occupiers expect stricter regulations.
69% ESG Focus
21% Decline
Q3 2024 take-up was 21% below the 5-year average.
The Industrial and Logistics sector show, respectively, a decline in take-up of 15.56% YOY and 14,82% YOY in 2024 Q3. After years of fierce competition for limited space, occupiers are more selective about the location and quality of space they choose. Efficient and sustainable logistics planning takes priority, aligning with slightly increasing vacancy rates of 0.91% YTD for industrial and 4.75% YTD for logistics. In the office market, take-up fell 36%. Although often interpreted as an effect of hybrid working, macro-economic circumstances are having an impact on demand as well. Next to this, the debate about the future role of the office is anything but decided, as a recent KMPG survey found that 83% of CEO's of major global corporates predict a full return to the office within the next 3 years.
Take-up volumes in sq. m. per quarter per real estate sector
Source: Savills Data, Intelligence, and Strategy
Low Activity in the
Take-up in the Industrial and Logistics Sectors Declined, Respectively, 16% YOY and 15% YOY.
Corporate occupiers are also still experiencing the consequences of macroeconomic headwinds in the Netherlands. The ECB’s overnight rate was 4.0% a exactly a year ago, falling 75 basis points by the end of 2024 Q3. However, the fall in rates has not been accompanied by increase in offices vacancies. which have remained stable at around 6.2% in 2024. This correlates with an increase in rake-up in sublease space, a phenomenon we increasingly see.
Macroeconomic Headwinds Impact Corporate Occupiers
Vacancy rate per sector
Source: Savills, Data, Intelligence, and Strategy (2024)
While the total number of bankruptcies in the retail sector rose 47% YOY in 2024 Q3, it was still 22% under the pre-COVID-19 pandemic quarterly average for the preceding 10 years.
For the remainder of this year the upward trend is expected to continue slightly, as substantially increased payment debts accumulated during the Covid-19 pandemic have some retailers struggling to stay above water. It is striking that an average of only 1.5 bankruptcies occurred among supermarkets and department stores compared to 10 bankruptcies among smaller retailers selling other* products. Traditional smaller shops are losing ground to larger retailers, which are expanding their business in both square meters and the range of products offered to consumers.
Number of bankruptcies in the Retail sector in the Netherlands
Source: Statistics Netherlands
Retail and its transformation increasingly on the radar?
The retail sector has experienced the smallest decline in take-up of 6%-YOY. The trend in retail take-up and vacancy in recent years suggests a stable market, albeit still facing numerous challenges.
Adapting to Changing Consumer Demand and Leveraging Technology to Drive Growth.
*Shops selling other products include: shops selling clothing and fashion goods; textile supermarkets; shops selling shoes and leather goods; pharmacies and shops selling drugstore, medical and orthopaedic articles; shops selling perfumes, decorative cosmetics, body, hair and oral care products; shops selling flowers, plants, seeds, gardening supplies, pets and pet supplies; shops selling jewellery and watches; shops selling photographic and optical goods; shops selling gift articles; shops selling antiques and second-hand goods; shops selling articles not mentioned elsewhere.
*Industrial vacancy rate available since 2023
Investment market
in the netherlands
Dutch Real Estate Investment Stalls in 2024
Despite improving conditions, capital focused on core strategies, which generally involve large investment sums, remains dormant in the Netherlands. This is a consequence of much slower fundraising, with average times to close new funds increasing to 22 months in 2024 from 13 months in 2020. It is representative of the current lack of appetite from large institutional investors to allocate to real estate more generally.
Major transactions in 2024 Q3 followed similar trends to those recorded in H1 2024 and 2023. The improved borrowing outlook will take time to stimulate real estate investment. Value-add or core+ strategies remain dominant and are likely to continue into Q4 2024. Examples of these strategies in Q3 included ERES REIT's sale of 60% of its total Dutch residential portfolio for approximately €760 million.
As such, residential investments have exceeded industrial & logistics investments in Q1-Q3 2024 by 38% year to date (YTD). Although stricter regulations in the Dutch rental sector have boosted these volumes, it can be expected that they will result in less capital circulating in the Dutch rental market in the long term. Furthermore, hotels were strong performers last quarter as prices in this segment overcorrected, and the shake-out of occupier fundamentals has been more clear already.
Residential Leads, Dutch Rental Tightens
2024 About to Surpass 2023 in Investment Activity
Globally, 2024 investment volumes lag behind 2023 levels, primarily due to investment in North American offices collapsing. However, the picture in Europe is brighter, with total investment volumes 5% YOY higher in the first nine months of 2024 than in the same period in 2023.
Consequently, 2024 looks on track to surpass total volumes in 2023. Investment market circumstances are also improving in the Netherlands, where transaction volumes rose 30% in Q3 2024 compared to the corresponding period in 2023.
As low investment volumes are directly tied to the spread between real estate yields and ‘risk-free’ products such as government bonds, the slow year of 2023 has not been surprising. In 2024, yields across different asset classes were relatively stable until Q3, when government bond yields slowly but steadily began falling. The spread of property yields over bonds increased, making allocations to Dutch real estate look more attractive to investors. Savills expects this movement to trigger more investment activity in Q4 2024 and 2025. The stability of real estate yields in 2024 has already drawn Core-focused investors back to the logistics market, reflected in the number of transactions of prime assets with long-term leases.
Returns, returns, returns...
Furthermore, investors’ cost of capital has gradually decreased, accelerated by the ECB’s reduction in interest rates. Opportunities to use debt have grown with reducing borrowing costs. This is reflected in the decline of the 5-year interest rate swap, which is
typically used by investors purchasing larger ticket sizes, reaching 2.3% in October 2024. As this facilitates investors handling larger ticket sizes, gradually more activity in the core-segment towards the end of the year as well as 2025 can be expected.
Source: Savills Data, Intelligence & Strategy
In Q3 2024, the spread between government bonds and Dutch real estate yields slowly increased
2024 is already on the brink of surpassing 2023 investment volume
Better circumstances
for buyers and occupiers
The scarcity of suitable space and the slow and patchy upturn in the economy has left many businesses delaying decisions about their requirements.
Savills expects the differences in take-up between different locations and quality will widen, especially for offices. On the one hand, direct effects of downsizing companies on total vacancy on prime locations will likely remain limited due to subletting, as well as growing occupier preferences for accessible locations. These locations still strongly attract businesses aimed at creative and technological innovation or highly specialised business services. Both still need to draw on reaching as many possible specifically educated workers, while also being able to reach a broad customer base. On the other hand, less accessible locations where back-end work or administrative tasks are completed, will lose in relevance as well as ultimately in overall usage.
Dutch Real Estate Gains on Lower Yields
Bas Wilberts
Director Investment
Savills Data, Intelligence & Strategy Our independent Data, Intelligence & Strategy team solves all of your real estate issues. We work together with developers, investors, municipalities and occupiers and offer them high-quality, highly detailed customized analyses without losing sight of the strategic question. Our advice is based on a solid combination of reliable data and in-depth market knowledge of the various market segments within the real estate market. In our analyses we focus on factors that influence the supply and demand of real estate. The product we deliver always depends on your wishes. We offer a wide variety; from a smart one-pager, an extensive research report to a tailor-made dashboard. Our product will support you in making well-founded property decisions.
Contact
+31 6 55 47 49 60 b.wilberts@savills.nl
+31 6 61 04 23 39 c.pritchard@savills.nl
Clive Pritchard
Head of Country
In general, the outlook for Dutch real estate has improved throughout Q3. The relative pricing of Dutch real estate has benefited from the fall in Dutch Government bond yields. A further tailwind is the decrease in borrowing costs with the decline of 5-year Interest Rate Swap Rates, which are expected to fall further by the end of this year. In addition, the gradual stabilisation and recovery in occupier fundamentals should also contribute to a continued recovery in investor sentiment. Indeed, the increased stability in real estate yields has already drawn core-focused investors back into the logistics market, reflected in multiple transactions of prime assets with long-term leases, and Savills expects the gradual recovery in activity in the core segment to continue into year-end.
+31 6 15 58 50 12 kees.vanvilsteren@savills.nl
Kees van Vilsteren
Director Valuation
+31 6 15 28 24 83 ellen.waals@savills.nl
Ellen Waals
Head of Agency
+31 6 21 45 05 35 pascale.schellekens@savills.nl
Pascale Schellekens
Analyst Market Intelligence
+31 6 15 31 79 47 raymond.frederiks@savills.nl
Raymond Frederiks
Associate Market Intelligence
