Savills expects uncertainty about the ECB's interest rate outlook and the impact of regulation on investment and development markets to be the biggest influences on Dutch real estate investment volumes in 2023. Despite the fact that demand for commercial real estate decreased in 2022 compared to 2021, the international real estate advisor expects that 2023 will be the year of leasing.

The accumulation of expenses for companies, such as increased costs of labour, goods, electricity, gas and financing, affected tenants’ demand for real estate in 2022. Partly as a result of this, take up volumes declined by 12% year on year in 2022. However, due to recent developments, such as lower gas prices, current cost concerns will diminish.

Savills expects that long-term trends in particular will continue to determine the development of supply and demand of commercial real estate, especially now that the outlook for the Dutch economy has been adjusted upwards. For example, in the office sector, a downward trend in total take-up volumes has been visible for some time, with demand increasingly shifting to assets with high standards and ESG ratings of which there are less.

Table: Change in take-up (in sq m per year), 2022 vs. 2021

Source: Savills DIS

In the logistics sector, the scarcity of available space was the main reason for a decline in take-up volumes in 2022, despite vacancy rates slightly rising between Q1 2022 and Q1 2023. This was mainly due to several large scale new-build developments which have not yet been fully leased. In several hotspots, the vacancy rate is still at or close to zero. On the one hand a decrease in consumer spending has led to a reduction in online shopping, but on the other hand, nearshoring continues to cause an increase in demand in locations such as Rotterdam. New developments are also hindered by limited access to the power grid, nitrogen and the ‘Not In My BackYard’ discussion.

Average rent vs. prime rent

Despite deteriorating economic conditions, none of the market sectors experienced a decrease in the average rent price per square metre last year. Instead, Savills says that trends seen in 2021 continued in 2022. In the logistics sector, for example, rents rose nationwide, while the spread between prime rents and the average rent remained the same.

However, this was not the case in the office market, where the spread between top rents and the average rent actually increased as a result of higher top rents: a logical consequence of a shift in demand to prime. The opposite happened in the retail market: due to falling market rents in prime locations and a better balance between supply and demand in the rest of the market, the spread between average and prime rents narrowed.

Clive Pritchard, Head of Country at Savills in the Netherlands, comments: “We expect demand from office occupiers to remain robust in 2023, as the market is still tight, especially of product that meets ESG requirements. Landlords do not have to worry about existing tenants and possible new tenants in the coming year. The challenge in 2023 will be refinancing and sale and acquisition options. We expect investors to be cautious about investment activity, and advise them to keep in touch with their tenants. 2023 is the year to invest in tenant satisfaction.”

Read the full report here.