Netherlands office investment market hits €1.1 billion in the first half of 2012

Appetite from German funds for prime Dutch office properties remains high, accounting for 47% of office investments (€516 mln) in the first half of 2012, according to Savills latest research report on the Netherlands commercial real estate markets.

The international real estate advisor records a total office investment volume of €1.1 billion in H1 2012, a rise of 36% compared with H1 2011. The firm notes that this increase is largely due to Chalet Group buying the Philips High Tech Campus in Eindhoven for €425 million.

The report states that overall investment volume across office, industrial and retail sectors decreased by 10.1% year-on-year in H1 2012 to €1.63 bln, from €1.81 bln in H1 2011. Savills expects the total investment volume in the Netherlands to reach €3.2 bln by year end, slightly below the 2011 total of €3.4 bln.

Jeroen Jansen, head of research at Savills in the Netherlands, comments: "Whilst the overall investment volume in the Netherlands has decreased in the first half of 2012, investor interest in prime commercial property remains high. Forced sales will continue to come to the market in the second half of the year and into 2013, creating further opportunities for value-added investors and private equity funds."

In terms of yields, Savills finds that financing constraints and limited liquidity in the market has forced prime office yields up by 20-50 bps in the last six months to between 5.6% and 5.9% net yield in the four largest agglomerations. Prime industrial yields have also risen on average 25 bps in the major markets, to for instance 7.25% in the Amsterdam/Schiphol area.

Savills notes that the increase in both these sectors makes them more attractive to opportunistic investors and highlights the purchase of the distressed Uni-Invest and Orange office and industrial portfolios by private equity funds in Q2 2012 as evidence of this. Prime high street retail yields, on the other hand, have decreased by 25 bps to 4.0% in the city centre of Amsterdam in the same time period, showing continued interest for this type of product.

In the lettings market, due to a weak second quarter in the Netherlands, Savills records an overall take-up volume of 1.83 million m² in H1 2012 across the office, industrial and retail sectors. This represents a decrease of 17% on H1 2011 which saw take-up volumes of 2.20 million m².

Similar to the investment market, the office letting market recorded the best performance of all the sectors in H1 2012, with take-up reaching 705,000 m² marking a decrease of just 6.9% from the same period in 2011. The majority of office deals were concentrated in Holland’s key cities of Amsterdam, Rotterdam, The Hague and Utrecht.

In all, 11 out of the 15 largest H1 office transactions took place within these markets, predominantly in mixed-use schemes in well connected locations such as the area surrounding the Arena in the Amsterdam Southeast district, which saw three key H1 transactions conclude.

Coen de Lange, head of office agency at Savills in the Netherlands, says: "We expect occupier demand for prime assets to remain stable in the rest of 2012 and 2013 across all commercial markets. Prime rents should also remain steady, while rental levels at secondary locations are under downward pressure due to lower demand and increasing vacancy levels, widening the gap between prime and secondary product."