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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 sectors
Netherlands real estate investment dropped significantly in 2020 due to Covid-19. Markets, such as the Dutch one, that depend on foreign capital came under pressure as international investors adopted a more cautious stance during the pandemic. Tenants also struggled to pay their rents.
However, the Dutch property market is becoming more active again: investors are starting to feel optimistic and we are having more conversations with clients - existing and new - who are looking for real estate deals.
In line with most other global markets, investments in Netherlands real estate were much lower in 2020 compared to 2019. The pandemic has not affected all real estate sectors equally, though. The hotel, office and retail markets have been hit harder than other sectors, such as logistics and industrials. This is due to fewer people visiting hotels and shops and working in offices while contact-limiting measures were in place.
The rent challenge for Netherlands real estate investors
The impact on the hotel, retail and office sectors has been exacerbated by tenancy problems. It has been challenging in some cases for landlords to get rent from their various tenants, for example, in large retail parks with multiple shops (and multiple tenants), or large office blocks with different companies occupying the floors. Compare these with the logistics sector, where a property may have just one tenant - a distribution centre (which probably did well during the pandemic) - and you can understand why rent problems have been more significant in certain sectors.
The Dutch government introduced measures to help tenants, such as covering their costs or delaying their tax bills. Landlords have also stepped in to offer assistance: their first approach is normally to propose deferred payment options to tenants (while extending their leases). If this is not accepted, landlords will consider rent reductions. In fact, the courts in the Netherlands decided last year that in certain cases, it is fair for tenants to ask for a rent reduction.
Negotiations between landlords and tenants have been difficult and in many cases are on-going. On the one hand, the landlord doesn't want to lose money; on the other, they don't want to lose their tenant either. We have attended board meetings with our clients and their tenants and advised on rent reductions of, say, 10%, 30% or 50%.
What does the future of Dutch real estate investments look like?
While uncertainty remains over the Delta variant of Covid, investor sentiment is beginning to shift. Infection levels are decreasing in the Netherlands, restrictions are beginning to ease and investors are feeling more positive.
Existing clients are indicating that they are looking for real estate deals, and we are seeing more interest from prospective clients. We anticipate more investments being made in the second half of this year. Investors have been eyeing up real estate assets for a while and we think some will be ready to go ahead and commit very soon.
The reasons why the Netherlands has been attractive for real estate investments still hold true. It has a stable climate and political environment, good infrastructure, tax benefits and is a useful country in which to build a hub and create a European footprint. However, investors do typically want to view a property in person before committing, so more borders will need to reopen before we see a substantial uptick in activity.
Which real estate deals are most attractive in the post-Covid Netherlands?
The popularity of types of real estate really depends on the client in question. Some are focusing on distribution assets, while others are more interested in hotels and retail. Some are just looking for the best opportunity right now.
Investors are still interested in city centre properties; the pandemic has not triggered a change here. Amsterdam, Rotterdam and Utrecht continue to be in demand. However, we are witnessing more appetite for distribution and logistics assets. The explosion in e-commerce means there is an increasing need for logistics space. There are some good strategic locations within the Netherlands, such as towards the east of the country near Belgium and Germany, and also between Amsterdam and Rotterdam.
We are also seeing a change in how Dutch people work. Individuals are working from home for part of the week. So how will offices look in the future? We have some clients that are styling office spaces almost as multifunctional community centres. Workers will sit alongside not just their own colleagues, but also workers from other companies. Downstairs spaces boast lots of green plants and coffee bars, with people coming in and out and making connections. Upstairs the office will have more breakout areas and spaces for virtual meetings. Property developers will need to think carefully about the sort of offices they provide to attract the best investors and the best tenants in future.
Why Intertrust Group?
Intertrust Group's global presence and diverse services make us the perfect transformational partner to boost cross-border real estate activity
We can assist in setting up real estate structures routed via the Netherlands
We offer corporate services for Dutch Holdcos and PropCos, such as domiciliation, provision of directors, corporate legal secretary functions and book-keeping
Find out more about our Dutch office.
Check our FastTrack to global real estate structures.