By Tom Leahy on March 30th, 2021
The Covid-19 pandemic has only strengthened the investment case for logistics and residential commercial property. Among Europe’s leading markets, the increased investor preference for these property types was most acute in the Netherlands, the continent’s fourth largest market, during 2020, and new investment records were set for acquisitions of both industrial and apartment properties.
More was spent on the industrial and apartment sectors than the rest of the Dutch market combined last year. Investors acquired €8.6 billion ($10 billion) of residential property, just higher than the 2019 total. In the industrial sector, investors bought €4.5 billion, again just ahead of the prior peak in 2019. By contrast, activity in the office sector fell 33% year-over-year in 2020 and in aggregate the Dutch market dropped 12%.
Investor demand for both the apartment and industrial sectors has been driven by positive fundamentals in the occupier markets – urbanization, increased demand for residential stock from renters, online retailing’s heightened importance, and the push for efficiencies among the logistics operators – and also by the shift away from retail, which is forcing capital into other asset classes. The latest INREV Investment Intentions Survey put Dutch industrial and residential property as the seventh and eighth most sought-after European asset classes, ahead of U.K. industrial and residential, suggesting this push is set to continue.
Investor demand for industrial properties has focused on the densely populated Randstad area, both in and around Amsterdam and close to the port at Rotterdam. Other hubs are Venlo, close to the German border and locations close to the Belgian border. Pricing for industrial property has really accelerated in the last two years in response to investor demand: in the Randstad area, RCA’s Hedonic Series shows prices per square meter have increased by 20% and in the wider Dutch market by 31%.
For the apartment sector, Amsterdam is the number one market and a record €1.8 billion was spent in 2020, with another €3.2 billion deployed in the rest of the Randstad conurbation. The price paid by investors for a single apartment unit in Amsterdam has increased by 80% in the last five years, in the Randstad by 47%, and in the wider Dutch market by 27%, RCA Hedonic Series data shows, with the lion’s share of the growth occurring through early 2019.
Different sets of investors have been leading buyers in the two sectors. For industrial assets, 80% of capital spent in the last five years has been from overseas, with a largely even split between European and non-European investors. Dutch institutions have been much more important in driving forward the residential market, buying 60% of assets in the last five years. Key domestic investors in the apartment sector include Vesteda, Syntrus Achmea, Rubens Capital and Bouwinvest.
The resurgence of the Covid-19 pandemic in the first months of 2021 means deal flow has been slow across the entire Dutch market – just €1.7 billion of deals have completed for the year so far. It should be noted though that this slowdown is replicated across much of the rest of Europe.
A potential headwind for apartment investors specific to the Dutch market is the increase in transfer taxes that started in January 2021, which may have spurred investors to pull some 2021 deals into 2020. However, the weight of capital looking for opportunities in beds and sheds means there will be a rebound when the market fully reopens and normal business resumes, and the pent-up demand should largely offset the change in tax regime.
More about Amsterdam commercial property trends on RCA Insights: