Repriced Dutch retail property sector poised for rebound

The retail property sector in the Netherlands is starting to look more attractive following a major price correction over the past couple of years, Peter Helfrich, managing partner at Primevest Capital Partners, said during an investment briefing on the Dutch market held recently at the Amsterdam office of law firm CMS.

Peter Helfrich

Prospects are particularly good for well-located properties in city centres with the possibility of adding residential on the top floors, he said. “Pricing is now looking more interesting with yields of 8-10%. If I had to take a bet, I would do it on retail.”

The office market meanwhile continues to suffer from the ongoing fallout of the working from home (WFH) trend, but fears of an approaching Armageddon are overblown, the panel agreed. Secondary locations such as Amsterdam Zuidoost to the southeast of the city may be seeing vacancy rates increase from 6% to 11%, but central Amsterdam office locations are holding up well with vacancy levels under 5%.

“We’re clearly seeing a binary market,” said Bas Wilberts, director at Savills. “The Zuidas business district in Amsterdam, for example, is a mixed-use location which will remain attractive. The prospects are quite different for monofunctional office locations and older offices on secondary locations which are not close to public transport hubs, and which would be quite costly to upgrade.”

Bas Wilberts.

The big question hanging over the highly polarised office sector is what to do with all the obsolete space coming to the market, Rogier Bos, head of real estate finance Benelux at German financier Berlin Hyp said. “If office buildings do not comply with the current ESG and sustainability standards, they need to be upgraded to attract talent, or converted into something else. But so much redundant office space has already been converted in the past 15 years, it’s not that easy.”

Most, if not all, of these outdated office properties will become stranded following the introduction of the EU Taxonomy, the cornerstone of the EU’s sustainable finance framework, Tijmen Brüne, senior real estate lawyer at CMS pointed out. “The Taxonomy is not yet binding, but some institutional investors, particularly the Germans, are already taking it into account in their due diligence processes and monitoring whether their investment funds will comply in future.”

Tijmen Brüne.

The sustained demand for residential assets since the GFC has meanwhile propelled the housing sector to the top of the Dutch property ladder at the expense of offices and retail. Both Primevest and M&G Real Estate are keen to invest in all segments including student and senior housing, but a key problem is that product is not readily available, said Laurien van Wieringen, director investment and asset management at M&G Real Estate.  

“There’s a huge undersupply of student housing. Some 50% of all students in the Netherlands are not renting accommodation because they simply can’t find it or it’s too expensive. But 75% of this group would like to rent. The fundamentals for student housing are really strong.”