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After Dutch real estate investment demand slumped in 2020, market sentiment is starting to turn. We outline why – and look at the most attractive industries
Real estate investments in the Netherlands fell significantly in 2020 due to Covid-19. Markets like the Dutch, which are dependent on foreign capital, have come under pressure as international investors have taken a more cautious stance during the pandemic. The tenants also struggled to pay their rents.
However, the Dutch real estate market is becoming more active again: investors are optimistic and we are holding more discussions with customers – existing and new – who are looking for real estate offers.
As in most other global markets, investments in Dutch real estate in 2020 were significantly lower compared to 2019. However, the pandemic has not affected all real estate sectors equally. The hotel, office and retail markets are harder hit than other sectors such as logistics and industry. This is due to the fact that fewer people visited hotels, shops and worked in offices, while contact-limiting measures were in place.
The rental challenge for Dutch real estate investors
The impact on the hotel, retail and office sectors was compounded by rental problems. In some cases, landlords have found it difficult to get rent from their various tenants, for example in large retail parks with multiple stores (and multiple tenants) or large office buildings with different companies occupying the floors. Compare this to the logistics sector, where a property may only have one tenant – a distribution center (which probably did well during the pandemic) – and you can understand why rental problems are more pronounced in certain sectors.
The Dutch government has taken steps to help tenants, such as covering their costs or delaying their tax bill. Landlords have also taken action: their first approach is usually to propose deferred payments to tenants (if the lease is renewed). If this is not accepted, landlords will consider rent reductions. In fact, last year the courts in the Netherlands ruled that in certain cases it was fair for tenants to ask for a rent reduction.
Negotiations between landlords and tenants were difficult and in many cases still ongoing. On the one hand, the landlord doesn’t want to lose any money; on the other hand, they don’t want to lose their tenant either. We took part in board meetings with our customers and their tenants and advised on rent reductions of, for example, 10%, 30% or 50%.
What does the future of Dutch real estate investments look like?
While the uncertainty about the Delta variant of Covid remains, investor sentiment is beginning to change. In the Netherlands, the number of infections is falling, restrictions are easing and investors are more positive.
Existing customers say they are looking for real estate listings and we are seeing more interest from potential customers. We expect further investments in the second half of the year. Investors have been watching real estate wealth for a while and we believe some will be ready to get involved very soon.
The reasons why the Netherlands is attractive for real estate investments still apply. It has a stable climate and political environment, good infrastructure, tax breaks, and is a useful country for building a hub and creating a European footprint. However, investors typically want to see a property in person before they commit, so more borders will need to be reopened before we can see any significant spike in activity.
Which real estate offers are most attractive in the post-Covid Netherlands?
The popularity of property types depends heavily on the individual customer. Some focus on distribution facilities while others are more interested in hotels and retail. Some are just looking for the best opportunity.
Investors continue to be interested in inner-city real estate; the pandemic has not triggered any change here. Amsterdam, Rotterdam and Utrecht are still in demand. However, we are seeing an increasing appetite for sales and logistics facilities. The explosion of e-commerce is leading to an increasing need for logistics space. There are some good strategic locations within the Netherlands, for example in the east of the country near Belgium and Germany, but also between Amsterdam and Rotterdam.
We are also seeing a change in the way the Dutch work. Individuals work from home part of the week. What will offices look like in the future? We have a few clients who are designing offices almost like multifunctional community centers. Workers will not only sit next to their own colleagues, but also with workers from other companies. In the lower rooms there are lots of green plants and coffee bars where people come and go and socialize. On the upper floor, the office will have more breakout areas and rooms for virtual meetings. Real estate developers have to think carefully about which offices they are offering in order to attract the best investors and the best tenants in the future.
Why Intertrust Group?
The global presence and diverse services of the Intertrust Group make us the perfect transformation partner to promote cross-border real estate activity
We can help set up real estate structures that are managed via the Netherlands
We offer business services for Dutch Holdcos and PropCos, such as B. Domiciliation, director provision, corporate legal secretarial and accounting functions
Find out more about our Dutch office.
Check our FastTrack on global real estate structures.