A sea of available capital
Although the range of core investment product (the main focus of investors at the moment) is limited, there is a lot of capital available.
This is partly due to the ECB’s buy-back programme, for which an additional injection of 500 billion was announced last year. The ECB is also keeping the interest rate at the same level to help boost the economy during the COVID crisis.
Real estate funds have also made more capital available for investment. The total available capital from the new funds was €315 billion at the beginning of 2021, compared to €281 billion at the beginning of 2020 (+12%). This is not including the increasing number of investing households and the associated available capital. Dutch households currently have limited spending options and investors are faced with a comparable challenge. The investment options that meet the requirements of investors are limited and as such they are struggling to find suitable destinations for the available capital. This has resulted in a decline in the total investment volume in the first few months of 2021.
"Dutch households currently have limited spending options and investors are faced with a comparable challenge."
Calm before the storm
As the winners of the COVID-19 crisis are revealed, current demand for investments in the Dutch real estate market is mainly focused on logistics, residential investments and food retail. The risks for office buildings and shops are still hard to assess, particularly for secondary locations. Uncertainty about the future of offices and inner-city shopping areas means investors will remain cautious until the permanent effects of this crisis become clearer. As a result, investors will gradually start daring to enter sectors again, such as the hotel and catering industry, retail and secondary offices. These markets are currently ignored because of the uncertainty about the long-term consequences after Covid-19. As the vaccination programme progresses, and travel restrictions are lifted, it will become easier for (foreign) investors to assess the risks of such investments.
It needs to be said however, that for (sub)sectors where COVID-19 has caused lasting economic damage, such as certain parts of the retail market, investors will remain reluctant to invest. In the long term, this means that the difference between core and other asset classes will widen.
"Uncertainty about the future of offices and inner-city shopping areas means investors will remain cautious until the permanent effects of this crisis become clearer."
Driven by the available capital, the expectation is that the investment volume in the broad sense will pick up again, due to an increasing demand for investments. Since it will take at least until the summer before a large part of the Netherlands is vaccinated, a very dynamic Q3 and Q4 is expected, in which records may be broken.
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