Logistics and Resi the sectors to bet on in the Dutch market

Logistics and residential are the two stand-out asset classes in the Dutch real estate market, experts agreed at Real Asset Media’s Netherlands Investment Outlook briefing, which took place recently in Amsterdam and was hosted by CMS.

“Our next investment could be in the Netherlands because the residential market is becoming more attractive,” said Hilke Nijmeijer, senior portfolio manager, CBRE European Residential Strategy. “It is a mature market, with good property managers, and it guarantees liquidity.”

Capital inflows in the sector were very low last year as investors had to deal with a perfect storm of shared macroconomic issues, like high inflation and rising interest rates, with local issues like the transfer tax and new regulations.

The problems have not gone away, said Nijmeijer: “We need to build the new supply the market clearly needs, but there is a short-term mindset to impose regulations on the sector. Investors need to know what the rules of the game are and have certainty they will not be hit down the line.”

Local authorities do not take into account the unintended consequences of regulations, she said: “There is a direct correlation with lower investment and lower building activity, so there will be less supply coming to the market in the next couple of years, just when the market is crying out for new supply.”

However, investors and developers are ready to work within the rules provided there is clarity and consistency so they can plan. They know that the challenges in the market must be balanced against the ever-increasing demand for residential assets, especially affordable housing.

“From an investment point of view residential is clearly a positive, as the population is increasing and there is growing demand from the occupier side,” said Peter Helfrich, managing director, Primevest Capital Partners. “But we cannot just buy, we need to build. We clearly have a problem with not building enough, partly due to lack of clarity over regulations.”

The Dutch logistics sector is facing the same headwinds and tailwinds as residential: on one hand heavy-handed regulations that limit development, on the other the positive dynamics of high demand and lack of supply.

“Industrial and logistics has always been a sector for us to invest in, even when transactions were declining and people complained about a lack of stock,” said Jan van den Hogen, head of tenant relationship management logistics, Deka Immobilien. “We never lost faith and kept investing, and now we see the market getting stronger and stronger, in the Netherlands and in the rest of Europe as well.”

The logistics sector in the Netherlands is being buoyed by the rise of e-commerce and the near-shoring trend, but it has to face stricter environmental regulations and growing opposition from local authorities.

“In Germany or France we have no problems getting a building permit for a large warehouse, but in the Netherlands municipalities are imposing their own rules against big boxes and driving investors out,” said van den Hogen.

As with residential, the negatives have to be balanced against the positives: high demand for assets and the prospect of increasing rents, a consequence of the high cost of ESG compliance and of low supply.

“We want to minimise risk and are very selective about where we invest,” said Rogier Bos, head of real estate finance Benelux, Berlin Hyp. “But we are always more than happy to invest in logistics.”