- Investment volume 2016 increases by 18 percent to EUR 14.8 billion
- Increased diversification over segments, residential investments to increase by 42 percent
- Investment volume in the past three years equals the volume of the preceding seven years
Amsterdam, 25 January 2017 – In 2016 investments in commercial real estate reached a record volume of EUR 14.8 billion. This means an increase of 18 percent compared to the last record in 2015 and an increase of 27 percent compared to the pre-crisis record in 2007. The strongest growth of the investment volume occurred in the housing segment which saw investments of EUR 4.2 billion, an increase of 42 percent compared to 2015. Investments in offices, with 41 percent of the total, had the greatest share of the total investment volume according to the figures of market leader Cushman & Wakefield.
Frank van der Sluys, Head of Research Cushman & Wakefield: “The current investment market is characterized by high investment volumes and increased diversification. In the past three years, the same volume was invested in real estate as in the preceding seven years. The domination of office real estate as an investment category – as this was visible before 2008 – is tempered. In 2007 the office investments share was still 65 percent of the total volume, while in the years thereafter this came to approx. 30 percent to 40 percent. The diversification is mainly expressed in the substantial increase in residential investments and segments such as logistics and healthcare real estate. The broader spread of investments over diverse market segments has substantially changed the market that has become less vulnerable.”
Factors of influence in the real estate investment market
Although real estate in the Netherlands will remain popular for the time being, Cushman & Wakefield expects that the investment volume in 2017 will not equal the volume of 2016. The increasing real estate prices can entail that a number of investors will look into countries that, with regard to profile, resemble the Netherlands a few years ago. Neither can the current investment dynamic be separated from the interest development, as a possible interest increase tempers the investment urge. Lastly, real estate advisors refer to political developments such as the coming elections in many European countries, the election of Trump and Brexit that will have an influence on the sentiment. A positive sentiment leads to higher investment volumes, a negative sentiment leads to lower volumes.
Mathijs Flierman, Head of Capital Markets Cushman & Wakefield: “More than ever, real estate investment is a financial product that is under the influence of financial-economic developments such as interest increases or decreases and the overall sentiment. In order to be successful in the current market, it is therefore of great importance for investors to approach real estate very strategically as an investment product.”
Future downs in investment dynamics will be less deep than in the past due to diversification of investments that reduces vulnerability and due to better analyses of the differences between markets, locations and buildings. These differences are very well charted in the Netherlands causing investors to increasingly base their decisions on elaborate market knowledge. The differences are therefore priced in, which entails future-proof decisions. This is reflected in the development of the returns: over the years more is being paid for the best real estate and less for less well real estate. In addition, the shorter ‘holding period’ of a number of investors contributes to less deep troughs, because real estate returns to the market more quickly. At present the first examples thereof are already visible among parties like Blackstone and Lonestar, the latter purchased the EVE portfolio in 2014 and sold it in 2016. Real estate that has been optimized in the meantime due to active asset management will return to the market more quickly and can continue to count on attention.
Outlook for 2017
Cushman & Wakefield expects that the total investment volume in 2017 will not equal the record year of 2016 although the great interest in Dutch real estate will continue. In 2016, there were relatively low investment volumes in retail real estate. Because of the increasing consumer, spending this segment will be more popular in 2017, especially if high quality real estate becomes available on the market as is expected. Due to the continuing shortage on the housing market in cities and adjustments to legislation and regulations, investors will also remain interested in (student) rental housing. In addition, logistics and healthcare real estate remains attractive for investors, the latter in part because of the population development and regulations. The attention for high quality offices at the best locations in the bigger cities will not disappear quickly.