According to Savills latest ‘Market in Minutes the Netherlands - Spring 2020’, the COVID-19 pandemic is changing the dynamics in the Dutch real estate market, although that impact varies significantly depending on the asset class and investment style.
The Dutch real estate market has been attracting domestic and international investors for several years. This has led to record-breaking investment volumes in recent years, with an annual average of €19.7 billion being invested in 2015-2019, compared to an annual average of only €7.8 billion in 2010-2014.
Jordy Diepeveen, Head of Acquisition at Savills in the Netherlands, adds: “The robustness of the investment market differs significantly between sectors and investor profiles due to the differences in the occupier market fundamentals. Over the next few quarters, the investment volumes and risk-return profiles for residential, core logistics and core-offices are expected to remain relatively stable compared to other submarkets. Due to this ‘new’ reality, a reallocation within the Dutch real estate investment market is to be expected in these uncertain times.”
However, we therefore expect to see an effect on investment levels and pricing in opportunistic and value-add real estate which has been acquired by leveraged investors, due to the increased risk in these asset classes. Since the COVID-19 outbreak, lending banks are less active on loan origination. Generally, lenders are risk-averse, which is impacting the conditions of LTV and the margin negatively. Core-investment deals are more resilient to risk, while value-add and opportunistic real estate deals are currently more sensitive to risk. By contrast, core-buyers tend to require little or moderate leverage and are not restricted by debt. As a consequence, the impact on prices in core-real estate is expected to be less visible.
Jan de Quay, Head of Investment at Savills in the Netherlands, says: “One example of a very recent core real estate transaction was the purchase of the Amber residential portfolio by Heimstaden for €375 million. This proves that there is still an appetite for core real estate among investors. Nevertheless, investors are currently postponing or even abandoning opportunistic real estate transactions, which means that the pool of active buyers is smaller. The number of these types of deals in the pipeline is falling and this will affect investment volume numbers in the second half of 2020.”