Netherlands office market

Transcription

1 August 212 Contents 1. Take-up of offices 2. Supply of offices State of Affairs Netherlands office market 3. Office rents 4. Office investments Colophon Composition Drs. R. L. Bak Data source NVM Data & Research, Nieuwegein Design Proof Studio, Photography Wim Oskam, Hollandse Hoogte The office market in the Netherlands ran into more difficulty in the first six months of 212. The amount of office space available for immediate occupation increased by almost 7% to 7.62 million m² (new record). In addition to the existing floor area, the number of properties climbed up from 327 to no fewer than 352. The demand side was poor too. Such is the conclusion based on figures which NVM Business presented only recently. The Dutch Association of Real Estate Brokers and Experts makes sure to collect and update these figures on a regular basis. The unexpectedly strong rise on the supply side is a serious letdown, as the office market is already suffering from a very imbalanced demand-supply ratio. In the Netherlands approximately 15.4% of office stock is now offered for rent or sale. Early this year the vacancy level represented approximately 14.5%. A larger floor area is being offered for rent or sale mainly because of existing, older offices. As far as we know hardly any new buildings were added in the first half of 212. Even though the supply level increased in many Dutch municipalities, proportionally the most impressive rise occurred in Zaanstad, Helmond, Weesp, Woerden, Den Bosch, Haarlem, Leeuwarden, Gouda and Leiden. Out of the four largest cities in the Netherlands, was the main victim where supply increased by no less than 13.5%. The office market suffered not only from much higher supply. Changes on the demand side had an impact as well. Because of poorer demand from banks, insurance companies and the non-profit sector, only 386, m² of office space were taken up in the first six months of this year. It is a 25% fall compared to the same period last year (514, m²). At the regional level in particular faced poorer demand for offices. was the only city that managed to push up the transaction volume so far.

2 1. Take-up of offices Poor demand is pushing the transaction volume seriously down In the first half of 212 the Dutch property market faced much poorer demand for office space. Provided the existing information on offices let and sold in the open market excluding the construction of owner-occupier premises is reliable, approximately 386, m² of office space were taken up, which is 25% less compared to the same period last year. In historic perspective the market experienced one of the strongest declines in the past ten years. Indeed, the transaction volume diminished impressively because of many depressing factors; however the main reason was the bad economic situation. Banks, insurance companies and the non-profit sector in particular needed less floor area. Office take-up, however, was very poor in other economic sectors as well such as trade, the construction industry and financial services. The business service sector, on the other hand, was much more reasonable although the increased demand could not make up for the drop in other sectors. Less office space was taken up in all size categories and least in the 5, m² to 1, m² category. : the positive exception in a challenging letting market Regionally, less office space was taken up in in particular. In the first half of, 63, m² of office space were let and sold, compared to no more than 3, m² one year later. too saw demand drop, although less significantly compared to the city of. In office takeup remained steady as the transaction volume was almost the same as in. A similar situation presented itself in the municipality of Haarlemmermeer (Hoofddorp/Schiphol). was the only city across the country to report a rising transaction volume. The capital owes this rise mainly to a sizeable lease transaction with Nuon the energy company, which decided to have its headquarters in. Outside Randstad the letting markets in Eindhoven, Groningen and Zwolle suffered the most. In Eindhoven the fifth office city in the Netherlands in terms of size demand was very poor as only 7 m² office space were taken up. The city of Zwolle also experienced a disappointing takeup level and therefore a very quiet market. Take-up of office space according to building type 2,, 1,5, 1,, 6 % 3 % North 6 % Central other West other 7, 6, 5, 4, 3, 2,, 5, m 2 m 2 1 % West North 24 % 7% 8% 1 % West Take-up of office space by region first half of 212 new development Central 5, 9, % 1, and more 12 % 19 % 2,5 4,999 Take-up of office space by region existing building North % Take-up of office space by size category first half of % 33 % 1, 2, E

3 2. Supply of offices Supply level exceeds expectations Against all expectations the office market had to put up with a much higher vacancy level as more square metres were offered for rent. The immediately available supply increased by 7% to 7.6 million square metres. The surprisingly strong rise was a letdown to the extent that one expected to level off the speed at which the amount of existing space has been going up since. Because of the climbing supply level, halfway through the year 15.4% of Dutch office stock was offered for rent or sale. Early in 212 the vacancy level reached 14.5% of the total stock. It was indicative of the fact that the rise followed from existing, usually older, offices that had joined the market. Insofar as is known, hardly any new office buildings were added in the first six months. Measured by the size of the available properties, supply was strongest in the 5 to 1, m² and 5, to 1, m² categories. In the last mentioned category, whole buildings were offered for rent, including the previous buildings of Belastingdienst (tax department), Ricoh, Eneco, BAM and TenneT. suffers the most Out of all different regions which NVM Business categorises, the region incurred most damage as the supply level exceeded 8%. This increase involved the North Brabant province in particular, with Den Bosch claiming a key role. Helmond too saw the number of available office space rise significantly while Eindhoven and Breda managed to dissociate themselves from the extended supply level. In addition to the region, the North region too was seriously put to the test where Leeuwarden was having a very difficult time. Out of all major cities in the Netherlands, paid the highest price (13.5%) so far. Surprisingly, supply intensified in the city centre. Also, more vacant floor area became available in the Lage Weide business park. too saw office supply climb up. Although the rise never exceeded 4%, halfway through the year 1.8 million m² were offered for rent, which is almost 18% of the total office stock in the capital. Some municipalities, on the other hand, saw supply level drop (e.g. in Diemen, Lelystad, Alphen aan den Rijn, Delft, Enschede, Rijswijk). Developments in Diemen attracted most attention as several large buildings were withdrawn from stock causing the vacancy level to drop by 4%. Supply of office space according to building type 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, North 8 % 7 % Central other 62 % 18 years and older m 2 12 % 14 % West other 14 % 2 years 2% 3 7 years 8 % Supply of office space by region mid 212 7% 8% 5% 12 % Supply of office space by age mid years 15 % years new development 1, and more 14 % 2 % 5, 9,999 existing building 26 % 2,5 4, % Supply of office space by size category mid % 1, 2,499

4 3. Office rents Average rent remains steady Again, reliable figures on rents were unavailable in the first half of 212. Investors continue to adopt a reticent attitude when it comes to sharing information on rents obtained and related incentives. As far as rents were communicated, some of the information available may not be perfectly reliable. In addition to the aforementioned problems, it is evident that office rents have been under more pressure because of even worse market conditions. Nevertheless, figures do not reveal as such. According to the available transaction data, the average rents paid for existing and new office space hardly budged in the first half of 212. Average rents of existing office space Opposing trends Although the average office rent hardly changed in the first six months of this year, several opposing trends presented themselves in different regions. Rent paid for existing office space in the middle and north of the country dropped slightly. Other regions did not experience appreciable changes. Out of all four major Dutch cities, only and saw rents drop, while the average rent paid for existing office space in was slightly higher compared to. In the new development sector the North and regions saw average rents drop West other Central other North Average rents of new office space West other Central other North

5 4. Office investments Randstad is popular among office investors A modest recovery dominated the Dutch property investment market in the first half of 212. Investors bought commercial property worth approximately 1.43 billion, compared to 1.2 billion in the same period last year. Despite a stronger investment volume, a bull market hardly presented itself. Many investors were not eager to enter the property market. One of the restraining factors was the fact that financiers too adopted a very reticent attitude. Strangely enough the office sector suffered less from the hesitant investment climate. In fact, investors invested significantly more in offices compared to the first half of. According to figures collected by NVM Business, investors bought office buildings worth approximately 9 million, which is more than twice the amount invested last year. One should bear in mind that the sale-and-leaseback transaction of the High Tech Campus in Eindhoven was of great consequence as the investment volume amounted to over 4 million. Also, two large-scale office complexes were sold in the Zuidas business district, adding to the higher volume. With the exception of the High Tech Campus in Eindhoven, most acquisitions involved buildings in Randstad, as investors clearly preferred first-class offices in, and. German investors remain active In addition to investors strong preference for offices in Randstad, German investors also managed to keep acquisition level in the Netherlands steady. In the first six months of 212 German property funds represented 43% of the investment volume, which is almost the same as in. Another striking fact was that out of all Dutch office investments, private investors took up most part. Professional investors (pension funds, insurance companies and property funds) hardly showed up. Office prices remain steady In the first half of 212 prices did not rise or fall significantly. Despite the hesitant investment climate and worse market conditions, the gross initial yield for offices remained almost the same. The gross initial yield did increase modestly in Randstad less popular areas (25 basic points on average), which obviously pushed down prices. Office investments according to building type 1, 8, 6, 4, 2, 48 % x million % % West other Randstad - best locations Office investments by region first half of % 6% 8% Randstad - other locations new development 1, and more 69 % existing buildings Average gross initial yields of offices The Netherlands other - best locations 1, 2,499 3 % 2,5 4,999 7 % Office investments by size category first half of 212 5, 9, % The Netherlands other - other locations

6 Definitions Office A spatial and independent unit used for the greater part for office activities or supporting activities. Office spaces that are part of business premises, universities or hospitals, are not considered offices. Take-up Letting and selling transactions taking place in the open market. Users who provide for their own accommodation requirements (the so-called owneroccupier development) are not included in the take-up volume. The same applies to sale-and-leaseback agreements and contract extensions. NVM registers transactions starting at 2 m². Rent The realised basic rent per square metre of lettable floor area, exclusive of VAT, service charges and lessees specific fitting-out costs. Gross initial yield The gross annual rent upon acquisition as a percentage of the total investment. Supply Office space immediately available for rent or sale. Offices that are under preparation and therefore still need to be built are not included in the supply. Supply includes vacant and developing offices as well as spaces that are still being used but which are soon to be released. Supply is measured in buildings providing at least 5 m². NVM-RegioN-division West North West Central North