Investor Sentiment and the Search for Stability
The Netherlands – Autumn 2023
Market in Minutes
Savills Research
This Report
CONTENTS
Other Reports
Get in touch
SAVILLS AMSTERDAM
SAVILLS UK
33 Margaret Street, London, W1G 0JD +44 (0) 20 7499 8644
Claude Debussylaan 48, 1082 MD, Amsterdam +31 (0) 20 301 2000
All content © copyright 2023 Savills. All rights reserved. Savills Nederland Holding B.V., established and registered in the Netherlands. Located: Claude Debussylaan 48, 1082MD Amsterdam. Chamber of Commerce (KvK) number: 33202244.
VOLG ONS
Investor Sentiment
Introduction
Market in Minutes Q3 2023
Imbalance in Investor Supply and Demand Keeps Transaction Volumes Low
As (re)financing costs have quickly increased over the last months, capital values of Dutch real estate have fallen by an average of 13.3% since Q2 2022 (MSCI, 2023). Especially the office market (-20.7%) and the residential market (-14.3%) are significantly down, respectively accounted for by insecurity regarding Working from Home (WFH) and impeding residential government regulations. Consequently, prime gross initial yields (GIYs) have increased by 200 basis points (bps) for the office market, 90 bps for the residential market, 50 bps for the retail market, and 160 bps for the logistics market since Q2 2022.
The Dutch real estate investment market has witnessed a significant decline in transaction activity in 2023 compared to 2022, with the slowdown continuing into the third quarter. Both the increase of investors’ cost of capital and a weaker occupier market have undermined transaction activity.
Dutch real estate transforms with global shifts. Demographics, digital disruption, and decarbonisation shape industry. Living, working, and markets evolve.
Occupier Foundations
Market Conditions
Outlook
Listen to our podcast: 'No Stone Unturned.' about the trends and developments in the Dutch real estate market. Savills’ Charlotte Harmsen is joined by experts across sectors. Retail, hotels, (flex) offices, life sciences, industrial and senior living. We bring you engaging and insightful discussions on the issues that matter most in Dutch property.
NO STONE UNTURNED
NEXT TOPIC
Tighter Financial Conditions Prove To Be Tougher For Real Estate Investors
CONTINUE READING
Market in Minutes Q2 2023
Market in Minutes Q1 2023
Contact our Team
Dutch real estate faces headwinds in 2023, with capital values declining steadily
Summer Special 2023
It is, therefore, no surprise that investment activity has been weak in Q3 2023. Although volumes were up by 9.9% compared to Q2 2023, there was a 54.1% drop compared to the same quarter in 2022. Investment Trends Year to date (YTD), investment volume totalled to €5.9 billion, which is a drop of 55.4% compared to the same period in 2022. The office market (-68.3%) and the residential market (-54.3%) showed a large decline compared to Q3 2022, corresponding with weaker occupier foundations in these markets. Furthermore, the majority of the investment transactions (74.4%) were transaction sized in the €0 – €20 million category. The total volume of investment transactions in the €0 – €20 million category represented 37.8% of the total investment volume, up from 25.9% in Q3 2022, signalling an upward trend in investor appetite for smaller sized opportunities.
Logistics Confidence Index
Weak Q3 2023 Investment Activity Reflects Challenging Market Conditions
Investor Sentiment Extremely Negative, But Recovering
ECB and Real Estate Impact
The increase of (re)financing costs for real estate investors has its origin in the European Central Bank’s (ECB) Monetary Policy.
Both the magnitude and speed of recent key interest rate increases are historical. In less than five quarters, the deposit facility interest rate increased by 450 bps to 4.0%. Consequently, spot yield for government bonds (10YR maturity) increased to heights that have not been seen since 2011.
Real estate investors are now trying to assess where future ECB interest rates, debt costs and returns on government bonds will settle. Most economists expect that key interest rates will stabilise, as inflation across the Eurozone is coming down (4.3% Y.o.Y. in September 2023). Nonetheless, the ECB is determined to bring inflation back to 2.0%, and will use all monetary levers needed to accomplish this. The difference between member states is, after all, large. Inflation Differences Where the Netherlands has been dealing with deflation in September 2023 (-0.3% Y.o.Y.), countries like France (5.6% Y.o.Y) and Germany (4.3% Y.o.Y.) are well above the ECB’s target. As a result, Dutch government bond yields (10YR maturity) are expected to peak in the near future before stabilising at 2.25% in 2025 (Oxford Economics, 2023). The higher returns from other asset classes will encourage investors to critically compare returns available from investing in Dutch real estate.
ECB's Inflation Challenge
Government bond yields are expected to stabilise in 2024 and onwards.
Weaker Occupier Fundamentals Affect Investor Demand
28%
of investors plan more aggressive acquisitions of assets across various sectors, up 14% from 2022
Market Challenges: Investors
The capital market backdrop has had a detrimental impact on real estate investments and European real estate investor sentiment.
Investor sentiment has imploded since Q2 2022 and reached its lowest point ever in March 2023 (Macrobond, 2023). This fall does not come as a surprise, as European investors have experienced continuing uncertainty regarding (re)financing costs, large decreases in capital values, and a mismatch in pricing. A mix of conditions that investors have not even experienced in the aftermath of the Global Financial Crisis (GFC) of 2007.
Evidence from Savills Europe and the Middle East (EME) Investor Sentiment Survey (2023), supports this. The share of investors that are planning to decrease risk-exposure of their portfolio by disposing of riskier assets over the next 12 months decreased from 55% in 2022 to 28% in 2023. Consequently, 28% of investors expect to implement a more aggressive strategy over the next 12 months, by acquiring more assets across various sectors, an increase of 14% compared to 2022. Investors view the Netherlands as the 5th most favourable EME country to invest in, behind the UK, Germany, France, and Spain. It confirms the position of the Netherlands as one of the most important real estate markets in Europe and the Middle East. Upcoming Investor Transaction Trends Over the next 12 months, investors expect that most transactions will take place in the €0 – €100 million category. High (re)financing costs are expected to remain a barrier for larger transactions. ESG, furthermore, plays a large role for investors. 72% Of investors were willing to undertake a ‘manage- to-ESG’ strategy to ensure assets comply with ESG regulations and ESG occupier demand.
Nonetheless, investor sentiment seems to be recovering.
Temporary Bumps In The Dutch Real Estate Market
Office Rebound
In part, weaker occupier foundations have also contributed to the decline in investment volumes. The office sector has been particularly affected in recent quarters.
Recovery, however, seems to be on the horizon, with leasing up 25.6% Y.o.Y. across the country. The Amsterdam office market seems to be the catalyst, with an increase of 116.4% in Q3 2023 compared to Q3 2022. This increase can largely be attributed to Amsterdam’s recent supply of best-in-class office space, its international allure, and its perfect accessibility by various modes of transport which make an attractive city for (international) occupiers. On the other hand, the share office take-up outside of the largest five Dutch cities (G5) decreased from 56.9% in Q3 2022 to 46.1% in Q3 2023. Retail Sector Challenges Looking ahead, the headwinds facing the Dutch economy are strengthening which might deteriorate business conditions in certain occupier sectors further. Bankruptcies are steadily increasing across the Dutch economy. Especially the retail sector is looking exposed, now that more and more retailers are filling for bankruptcy (Statistics Netherlands, 2023). Savills expects that the retail sector will experience more difficulties as the economy weakens and consumers spend less. Consequently, an increasing number of retailers will struggle to repay Government COVID-19 loans and pay rent increases. This will put a downward pressure on investment attractiveness, as rental growth for the retail sector is not guaranteed in the future.
In contrast, the industrial and logistics investment sector look more attractive due to its steady performance in 2023YTD. Leasing activity has been stable in Q3 2023, caused by stronger occupier foundations. Results from the Savills & Panattoni Netherlands Logistics Confidence Index (2023) show that 52% of logistics occupiers expect an increase in profits over the next 12 months. This corresponds with 60% of occupiers expecting to need more warehouse space in the coming 12 months. As the nationwide supply of logistics space is extremely low (2.7%), it is no surprise that prime- and average rents have increasing by respectively 5.3% Y.o.Y and 12.3% Y.o.Y.
Amsterdam is the driving force behind office take-up, with a 116.4% Y.o.Y. growth in Q3 2023
Logistics Strength
If ECB interest rates and (re)financing costs stabilise in the coming quarter, investment activity in Dutch real estate is likely to pick up. If the ECB, on the other hand, decides to further increase its key interest rates, European capital markets will have to deal with further instability and insecurity. Savills expects that, once stabilisation occurs, investor demand will recover quickly. The recent strength, speeds, and broad market awareness of Dutch property price corrections, should provide the conditions for a quicker recovery. Investors will undoubtedly discriminate according to leasing market dynamics. Sectors with weaker occupier fundamentals, or properties that are at a risk of becoming obsolete, face the largest price discounts. Sectors and assets that have performed strongly over the last year, and experienced rental growth due to favourable property characteristics or tight supply and demand ratios, like the industrial and logistics sector, are likely to experience increased investor interest in the next 6 – 12 months. Furthermore, investors will critically compare the returns on real estate to the returns on other investment assets like government bonds. Therefore, investor activity will likely remain subdued until stability has returned on worldwide capital markets.
After a difficult start of 2023, the hope for revival of the Dutch investment market exists, with macroeconomic stability as a prerequisite
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.
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK, continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
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.
Even though 2023 is likely to go down in the history books as the year with the least real estate investment activity recorded in the last decade, the forecasts for the coming 12 months are more encouraging.
Clive Pritchard
Head of Country +31 6 51 04 23 39 c.pritchard@savills.nl
CONTACT
Wouter van 't Grunewold
Market Intelligence Analyst +31 6 15 82 18 72 wouter.grunewold@savills.nl
Charlotte Harmsen
Head of Marketing & Business Intelligence +31 6 11 40 39 65 c.harmsen@savills.nl
Eurostat, Macrobond, MSCI, Oxford Economics, Savills Data, Intelligence and Strategy, Statistics Netherlands
Sources
Key Findings
Stability as a Prerequisite for Recovery
The ongoing instability regarding (re)financing costs and weakness in certain Dutch occupier sectors have caused a decline in investor activity and investor sentiment in 2023. Investor sentiment amongst European investors has never been this low. Nonetheless, it seems to be recovering after a period of uncertainty regarding (re)financing costs, large decreases in capital values, and a mismatch in pricing. Now that investment sentiment seems to be recovering, Savills expects that investment activity is likely to recover again, albeit slowly. A prerequisite for this recovery is macroeconomic stability, which is expected to happen in the next 12 months.
Continuing instability in worldwide capital markets has had a large impact on activity in the Dutch real estate market. In Q3 2023, investment- and leasing activity was down by respectively 54.1% Y.o.Y and 2.2% Y.o.Y.
Market Activity Insights
Tougher financial conditions and a tougher occupier market has undermined investor confidence, However, the increase of prime GIYs seems to be over. This might indicate that transactional activity is in the rise again, and that investors expect more stability in the upcoming quarters.
Investor Confidence Shift
Savills still sees a lot of activity in the Industrial and Logistics market. Supply and demand ratios are extremely tight, which is continuing to cause rental growth. Prime logistics rents have increased by 5.3% Y.o.Y. The logistics sector is expected to remain robust in the upcoming quarters.
Robust Industrial and Logistics
Savills believes the worst may be behind for the Dutch investment market. If more certainty around ECB Policy emerges and Government Bond market volatility stabilises, investor appetite is expected to improve. Transaction volumes could increase by up to 40% in 2024, with investors focussing on sectors with robust fundamentals.
Positive Outlook for 2024
1
2
3
4
Summer Special
Demographic Disruption
Utrecht City Special
Amsterdam City Special
Ipid quas eariati
Cum et fuga. Vitem comnis ad milit la quasper spitassed ut porporrum sim ipsus doluptatur sim ressit eriatu Ihicit ex
demographic Disruption
Berit ipsae voluptation
Henim nos moloraepe aut aut ium quo quis abo. Nam ulparia enienis dolutas sequas molectem faccus venimolorio endaerspidi odionsequi tem aces atecum idunt et
Onsequamet aut laccum quia dist optatiatio. Itaecti ut hit il is maionecea des que nobit aliquae ptatia qui cum que sitaect iaeris vendebistium iur, ilit voluptatiis nonem ipsuntur aliquod igniet, con res magnist is alignimusam faccabo reperia quid quistrum. Quundae reperror soloriatur aut explaborem sendeseniet volo tem. Ici omnihil maios eaquunt moditis nusapis dolo dolut mostisc iuntem rebbv gvyf kig uykbcdkm doluptis sequaerum rem. Enis natento beaquia eos aut ut eaquasim volupit atinver natium alit quia ditatio raectota nossuntur? Lorem upsum quundae Odiam dolorpor reped mo idebis et quaturecest eum dolecum fugiam escipid ipiciis sequis inihita velignam rature quiam hilignis este pratas et reperoratem quisinte parum vitaque odit, con por ate eossi des iusciatent placcus ciissi dus enimincium harciis es aute commolorero exerferum, sunt dis is qui quias quae eatiorum faccatis repelib erumquibus antotasped ut exerumquo ma esedipsandi culpa audae. Umquatur asped quamus.Igent pro earchiliqui in eos doluptat volupta veniet platibu sdaepta turestrum qui sitium ad ea doluptatur, que nihilibus quatqua temosti derum ut liquia ni dis etus is doluptatios venis eium as ma incturion rae la quo doloratentis sapiet arcienempore sequat.Archillaut providel iur am labore pedi que la dolorpos enet re dereptiis elique cum lab iumqui od maiorrum harum nos experum dunda dolum vel molore accust maio. Et fugit rem abo. Et fugiate verum inciatiae consernatur, est quiam reptae comnitatur sinim velendipit, quam exceaqui conNum eati venimagniene commo velest ab isquisquatur aceaquam, quuntur? Dolorrum estruptas nestiat quis ea ped min numque voluptincto earum as sus ea dis nihitat. Henditiatur, voluptas solesto et pellanditi quo et re in consent as di nulparum re, sit reheni de re con cus.Ihiciam eos aciisquatque od ut aut vent, asi omnimus nobitius aut magnita temque qui sincte dolor ra susapitatias adit que illuptatem quis etusam. Lorem upsum quundaeOdiam dolorpor reped mo idebis et quaturecest eum dolecum fugiam escipid ipiciis sequis inihita velignam rature quiam hilignis este pratas et reperoratem quisinte parum vitaque odit, con por ate eossi des iusciatent placcus ciissi dus enimincium harciis es aute commolorero exerferum, sunt dis is qui quias quae eatiorum faccatis repelib erumquibus antotasped ut exerumquo ma esedipsandi culpa audae. Umquatur asped quamus.Igent pro earchiliqui in eos doluptat volupta veniet platibu sdaepta turestrum qui sitium ad.
Min esciur audit, vellisciae venihillit ratiis as nes eic to blacess ecuptur mint ant.Optur mos nimi, offici utam volor aut que pra volecat ibust, cori as accae parumquis quo modi doloressimet utestio nseque volorerum sam con net exped. Onsequamet aut laccum quia dist optatiatio. Itaecti ut hit il is maionecea des que nobit aliquae ptatia qui cum que sitaect iaeris vendebistium iur, ilit voluptatiis nonem ipsuntur aliquod igniet, con res magnist is alignimusam faccabo reperia quid quistrum. Quundae reperror soloriatur aut explaborem sendeseniet volo tem. Ici omnihil maios eaquunt moditis nusapis dolo dolut mostisc iuntem rebbv gvyf kig uykbcdkm doluptis sequaerum rem. Enis natento beaquia eos aut ut eaquasim volupit atinver natium alit quia ditatio raectota nossuntur? Lorem upsum quundae Odiam dolorpor reped mo idebis et quaturecest eum dolecum fugiam escipid ipiciis sequis inihita velignam rature quiam hilignis este pratas et reperoratem quisinte parum vitaque odit, con por ate eossi des iusciatent placcus ciissi dus enimincium harciis es aute commolorero exerferum, sunt dis is qui quias quae eatiorum faccatis repelib erumquibus antotasped ut exerumquo ma esedipsandi culpa audae. Umquatur asped quamus.Igent pro earchiliqui in eos doluptat volupta veniet platibu sdaepta turestrum qui sitium ad ea doluptatur, que nihilibus quatqua temosti derum ut liquia ni dis etus is doluptatios venis eium as ma incturion rae la quo doloratentis sapiet arcienempore sequat.Archillaut providel iur am labore pedi que la dolorpos enet re dereptiis elique cum lab iumqui od maiorrum harum nos experum dunda dolum vel molore accust maio. Et fugit rem abo. Et fugiate verum inciatiae consernatur, est quiam reptae comnitatur sinim velendipit, quam exceaqui conNum eati venimagniene commo velest ab isquisquatur aceaquam, quuntur? Dolorrum estruptas nestiat quis ea ped min numque voluptincto earum as sus ea dis nihitat. Henditiatur, voluptas solesto et pellanditi quo et re in consent as di nulparum re, sit reheni de re con cus.Ihiciam eos aciisquatque od ut aut vent, asi omnimus nobitius aut magnita temque qui sincte dolor ra susapitatias adit que illuptatem quis etusam. Lorem upsum quundaeOdiam dolorpor reped mo idebis et quaturecest eum dolecum fugiam escipid ipiciis sequis inihita velignam rature quiam hilignis este pratas et reperoratem quisinte parum vitaque odit, con por ate eossi des iusciatent placcus ciissi dus enimincium harciis es aute commolorero exerferum, sunt dis is qui quias quae eatiorum faccatis repelib erumquibus antotasped ut exerumquo ma esedipsandi culpa audae. Umquatur asped quamus.Igent pro earchiliqui in eos doluptat volupta veniet platibu sdaepta turestrum qui sitium ad.
Undamet aut asimus ea dolupti busantio. Et ut am, aut ex esci blam volestia ipsam, acias con recto bearum comnis rati di vitat porum voluptatem eos quam remoluptae. Ut liquatibus, tem quo illuptas a sunt adignis et que nustia que prae pa num imin coneceperum, consequiam sum velectatio. Ita duntis ma que voluptatiur? Qui tota porum iliberum hilias seror as minvele niendandi doluptium, atio cum utas mincto ma nus ut es ersperum a sus nonsequid qui nobit ut que vendamenimet re, odit, odiamustia ipit esciis verio. Sed que sita sim idunt, namendae volecat laborrum quiam, quiderro min reperitatem. Alit dolupic tendis qui inveliquas re ernatus volumqui quatur lorem upsum.Hent as et ut ipiscipiet voluptate et, cum solore verrunt, in prempos moluptatur, nonserovid eum facidel ipsaerovit ullaborerum apedi debit ommodit auta in reria dolesti corempo rrovide litiore nobit eiuntur alit, verrovit, conse liquas ilitio. Facerspid et, sunt quidunt orepeliquae essimi, nonse poratlit, verrovit, conse liquas ilitio.Invenit, occulpa cusaesciunt volut unt delenim unt ad quam, sant abor accae. Sandenes
Lorem ipsum delorios
Many of the increases are associated with holdings that have been under-rented
Min esciur audit, vellisciae venihillit ratiis as nes eic to blacess ecuptur mint ant.Optur mos nimi, offici utam volor aut que pra volecat ibust, cori as accae parumquis quo modi doloressimet utestio nseque volorerum sam con net exped.
lorem ipsum delor sacnti
Qui blaceatem. Ut odigenimint. Evenis et poreium aut ommodit dolorempedit perciam harumet quae consequo secus pos inietut and andae mosam
chapter Disruption
Puzzle
Conclusion
Future Shifts Ahead