OFFICE

office-market-1

The Dutch Office Sector offering includes buildings and spaces with strong tenants: banks, governmental institutions, headquarters, etc. Investors in this sector enjoy secure returns of between 5% – 10% annually with potential for significant capital appreciation; and return on investment up to 16% per annum (if using bank finance).

Our Office Property Investments Strategy is to focus on very strong tenants, to source office investments that are located in prime areas demonstrating continuing and sustained demand that will generate a reliable and steady income stream for the investor. Of course we offer our office investments as comprehensive ‘turnkey investments’ where the administration of the property is handled by our experienced Property Management Department with no direct investor involvement required in the areas of accounting or tax as our specialised partners will deal with these issues on the investors’ behalf.

RANDSTAD OFFICE MARKET 2016

THE AMSTERDAM REGION

The office market in Amsterdam and the surrounding area was remarkably steady in the first six months of 2016. So far, the amount of space taken up in the open market has been equivalent to the same period last year. Good take-up levels followed primarily from positive developments in the Dutch capital itself, reporting approximately 125,000 m² had been rented out or sold. Many small-scale lease transactions were signed but also, sales levels were positively affected by major lease transactions involving e.g. UniQure, B. Amsterdam, Pon, Vistra, Under Armour, Stichting ROC TOP and Tribes. Interestingly, when it comes to the amount of attention dedicated to different locations, the area known as Sloterdijk-Teleport faced disappointing demand. Sales volumes dropped unexpectedly and also office sales in the city centre were something of a let-down as well. Different transactions were signed indeed, however total take-up volumes were less substantial compared to previous years. Especially the shortage of high-quality office space did put the brakes on sales volumes. Nevertheless, take-up levels were steady in the South Axis business district and Southeast. Offices were quite popular in Amsterdam, but this was less the case when it comes to the rental market in adjacent municipalities. Rented offices were hardly interesting in Amstelveen and Diemen. Although the market as a whole has been steady, developments did come with a number of observations. The shortage of modern office space is considered a problem and South Axis’ reduced accessibility by car is being criticised. Events were also typified by the fact that the total supply in this region dropped significantly in the first six months. It happened across a broad front, but it was most substantial in Amsterdam as the amount of office space available for immediate occupation went down by approximately 80,000 m². As a result, vacancy levels dropped to 15% of total office stock. Supply levels went down after existing buildings had been taken up, but also because some of the large office buildings had been withdrawn from stock to meet housing purposes among other things. Supply levels fell particularly in the city centre, the southern IJ bank and West. And even though supply diminished in most office locations in the first six months, the amount of space for rent slightly went up in South Axis district due to the speculative construction of the NoMA House. Vacancy levels in Amstelveen also diminished significantly, after withdrawing several large-scale offices including KPMG’s previous headquarters. As far as rents are involved, no interesting changes occurred in the first six months of this year; most offices succeeded in maintaining the same price levels. Incentives were reduced in some areas, like the city centre and parts of South Axis.

THE HAGUE REGION

This region experienced poorer demand for office space in the first six months of 2016. In the so-called open market – excluding offices built for owneroccupiers – it means less space was taken up compared to the same period a year ago. Owing to insufficient demand, the office market could not but settle for modest transaction volumes, never exceeding 45,000 m². The primary cause has been disappointing demand in The Hague itself. Lower sales volumes in this city did not only follow from lack of demand from the government, but also because only a few major transactions were realised. In fact, the only sizeable transaction that took place in the first half of this year involved ABN AMRO who decided to rent an office building on Koningskade, previously used by the Chamber of Commerce. In addition, Haag Wonen took up a considerable amount of space on Waldorpstraat. Nevertheless, the number of lease transactions realised remained steady, mainly because of small office users requiring 200 up to 1,000 m². Interestingly, lessees preferred renovated buildings. Hesitant trends in demand involved the city centre in particular as well as the Central Station area. Bezuidenhout, usually experiencing reasonable sales volumes, also reported insufficient demand. The Hague’s transaction volumes were disappointing in the first six months, however demand for office space remained steady in Zoetermeer, also due to transactions with the municipality and SBB. Even though demand for office space did not meet expectations, luckily the number of offices available for rent went down significantly. One of the reasons is that quite a number of vacant offices had been withdrawn from stock in order to serve different purposes. It paid off, particularly for the city of The Hague that was able to reduce the amount of leased office space by nearly 80,000 square metres. This number could have been more substantial, had large areas become available in e.g. the city centre, Bezuidenhout and the Central Station area at the same time. Altogether, halfway through the year, 13% of The Hague’s stock was available for rent or sale, versus 14.5% in late 2015. But still, The Hague was not the only city reporting lower take-up levels in the first half of 2016. The same was the case in Delft and Rijswijk. In Rijswijk, supply levels dropped after withdrawing nearly 20,000 m² on Steenvoordelaan. Interestingly, Zoetermeer reported increased availability partly after releasing areas previously used inside the Dutch Tech Campus and Kristal Kantoren. The vast majority of the market had to settle for pretty much the same price levels in the first six months of 2016. In parallel, incentives hardly changed as well, amounting to 20-25% depending on the location and lease period involved.

THE ROTTERDAM REGION

Demand for office space in this region developed reasonably well in the first six months of 2016. Assuming the reliability of data available on office space take-up, almost as many transactions were realised compared to the same period a year ago. Nevertheless, transaction volumes were smaller than those reported in 2015. Take-up decreased due to poorer demand for slightly bigger areas. Most transactions involved small to medium-sized spaces, in the 300 – 1,100 m² size category in most cases. Although focus was not on large lease transactions, some major office users were active nevertheless, including the municipality of Rotterdam, KPN, Saturn and IMCD. KPN was pivotal, deciding to transfer parts of its headquarters from The Hague to Rotterdam. Approximately 46,000 m² were taken up in the open market. Just like in previous years, demand was most significant in the city of Rotterdam. Because major lease transactions that did take place involved Kop van Zuid in the first place, this area claimed a significant share of total take-up; KPN and Saturn transactions had a major role as well. The attention paid to Kop van Zuid was at the expense of other locations across the city, Prins Alexander and Brainpark suffering the most with limited transaction volumes in both areas. Even the city centre had to settle for relatively limited office take-up. Of the surrounding places, only Capelle aan den IJssel managed to keep levels steady. Although different large-scale office buildings had been withdrawn from Rotterdam’s stock as well, total supply levels hardly dropped in the first six months of the year; the amount of space available for immediate occupation remained high. Reduced availability after withdrawals was to a great extent undone after existing offices had been added to the market. Because total supply hardly changed, halfway through the year approximately 21% of office stock was available for rent or sale. Even though supply with immediate possession as a whole did not climb nor fall significantly, more office space was available for rent in Rotterdam’s city centre. Interestingly, supply levels went up in the city of Schiedam. Capelle aan den IJssel, however, was able to prevent increased availability even though over 31% of total stock remains unoccupied. Significant price movements did not occur in the first six months of 2016; rents hardly changed if at all. Rents did not drop any further and remained at the level of 2015 because price corrections had already been introduced in previous years. On the other hand, incentives slightly diminished in the first half of 2016.

THE SCHIPHOL REGION

Demand for offices was disappointing in the Schiphol region in the first six months of 2016. As a result, transaction volumes were lower in the open market. Office users took up approximately 12,000 m² in total. Take-up levels in this region were something of a let-down, mainly because of less positive developments taking place at the airport itself. To the extent known, hardly any lease transactions were realised here. Demand was most substantial in Hoofddorp and Schiphol-Rijk. In Hoofddorp, lessees were particularly interested in the area called Beukenhorst East, although only a few transactions were signed in the end. Selling a large building on Wegalaan had a relatively great consequence. Other locations in Hoofddorp were irrelevant in terms of demand for offices, reporting even none in Beukenhorst South in the first half of this year. Surprisingly enough, different lease transactions were realised in Schiphol-Rijk. After launching a new connection to the A4 highway, the area has become more popular indeed. Whether demand for office space will pick up in the second half of 2016, remains to be seen. Even though some of the region’s major office users are planning to relocate, they might extend their existing leases after all. Despite limited demand for office space, supply levels presented a ray of hope nonetheless. Yes, the amount of space available in the first six months climbed to a certain degree, however supply levels went down on other locations in this region. This drop was embraced not only by Schiphol-Rijk. Supply levels also went down at the airport, after withdrawing a vacant office building in Schiphol-East. Although quite a few square metres had been withdrawn from stock in Hoofddorp in order to serve a different purpose, the amount of space taken off the market was insufficient for counterbalancing the increasing availability of existing office space. Increased availability presented itself mainly in Beukenhorst West as nearly 45% of offices was available for rent or sale halfway through 2016. One property developer’s plans to purchase large parts of the area and build houses, were dismissed eventually. The price difference between old and new offices was quite significant in the first six months of 2016. In Hoofddorp, limited demand for office space and large availability once again placed downward pressure on rents, particularly those charged for older buildings. Offices delivered only recently, however, managed to keep rents steady. Despite this downward pressure on rents, any further availability of incentives has been prevented.

THE UTRECHT REGION

The office market in Utrecht and the surrounding area has been remarkably satisfying so far, experiencing substantial demand for office space in the first half of 2016. Take-up levels amounted to approximately 65,000 m², versus approximately 29,000 m² in the same period a year ago. Take-up levels in this region were able to develop in a positive sense mainly after demand recovered in the city of Utrecht. After all, adjacent municipalities (Houten, Maarssen, Nieuwegein) were less impressive. In the city of Utrecht, demand for rented office space involved just over 60,000 m². These positive take-up followed not only from increased lease transactions, but also after letting out bigger areas. A key role was played by the FNV trade union who chose to have some of its branches in a building located along the A2 highway in Leidsche Rijn. Sizeable lease transactions with Achmea, University of the Arts and Ingram Micro allowed take-up levels to climb. Pretty much in line with previous years, in the first six months of 2016 demand was most substantial for offices based in the city centre, particularly in the Central Station area. In addition to the city centre, office users were also interested in Papendorp and Kanaleneiland. Demand for the latter involved new office space in the first place, including the Winthont Loft Offices currently under construction. In addition, De Meern also benefited from positive developments in the office market. A transaction signed with Achmea in this area was pivotal. But despite positive demand for offices in Utrecht, the market was facing more parking issues, affecting car-dependent business services the most. As mentioned above, adjacent peripheral municipalities reported hesitant trends in demand, especially Nieuwegein. Interestingly, however, the fully renovated office complex called Bisonspoor in Maarssen became more popular, although not quite many transactions have taken place so far. Despite healthy demand for office space in Utrecht, supply levels continued to climb, especially in the city centre and Rijnsweerd. And so about 16.5% of total stock was available for rent or sale in the first six months of this year. The rise that presented itself in the city centre mostly followed from the speculative construction of the World Trade Centre. In Rijnsweerd, supply levels were seriously affected by FNV’s departure. Considerable space had been abandoned by CMS Derks Star Busmann. In general, prime office space rents remained steady. In fact, higher rents were charged in the Central Station area. In Rijnsweerd, however, rents were under pressure.