Occupier market
Only slight weakening of demand from occupier market
Demand for commercial property
This accumulation of costs for businesses also had an impact on the number of company insolvencies in 2022: in the second half of 2022 there were 219 more insolvencies than in the first half of 2022, and 197 more than in the second half of 2021. At the end of 2022, there was also a temporary increase in the number of unemployed persons, which rose from 316,000 in April to 382,000 in September. This shows that Dutch trade and industry encountered much tougher conditions in the second half of 2022 in particular.
This affected total occupier demand for property, partly as a result of which the total take-up of commercial property fell in 2022 (-12%) from its 2021 level.
However, this can be attributed not only to deteriorating economic conditions but also and above all to a number of other factors which will continue to have an impact even after this purchasing power crisis has ended. In the office market, for example, a downward trend in the total take-up of office space has been perceptible for some time, as a result of the postponement of decisions on where to locate offices due to COVID-19. Moreover, many companies are still considering what the role of the office will be in the future.
In the logistics occupier market, scarcity of available space was mainly responsible for the decline in take-up volume in 2022.
The unhealthy supply/demand ratios have continued in the logistics market, despite the fact that the vacancy rate rose slightly between Q1 2023 and Q1 2022. However, this increased vacancy rate was mainly due to some large-scale new developments that have not yet been fully let. In several hot spots, the vacancy rate is at or around zero.
The logistics sector is faced by conflicting developments, on the one hand the purchasing power crisis is putting a brake on e-commerce while on the other nearshoring continues to boost demand in locations such as Rotterdam. The scope for new property development is also limited due to limited access to the power grid, the nitrogen crisis and the debate about the impact on the landscape of the rapid construction of box-like logistics centres throughout the Netherlands. Another factor is the decreased vacancy rate in the retail sector. Despite a decrease in total take-up, vacancy rates fell, mainly due to the conversion of retail properties to other uses.
Average rent compared with prime rent
Despite deteriorating economic conditions, no decrease in the average annual rent per sq. m. was visible in any market segment. Existing trends continued in 2022. In the logistics sector, for example, rents rose nationwide and the spread between prime rents and average rents remained unchanged.
However, this was not the case in the office market, where the spread between prime rents and average rents actually widened as a result of an increase in prime rents: a logical consequence of a shift in demand due to a preference for quality and prime locations. The opposite occurred 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 rents and prime rents narrowed.
Housing market
Greater impact of economic uncertainties visible
Although the fundamentals of the Dutch housing market are very strong from an investor’s perspective, the complexity of this segment increased in 2022.
First, sentiment on the owner-occupied market reversed as a result of the rise in mortgage rates. Sale prices per sq. m. fell by 4% in H2 2022 compared with H1 2022 and the supply of homes for sale increased by 64%. Unlike the situation in most European countries, the Dutch housing market is highly dependent on financing, with buyers being able to borrow at a loan-to-value ratio of 100%. Unlike the owner-occupied market, the rental market still recorded an increase and supply rose by ‘only’ 5%, which is indicative of a much looser correlation with macroeconomic conditions.
Although the regulation of the mid-rental segment has now become clearer, a combination of increased building costs and regulation at multiple locations has meant that making a business case for residential investment is not feasible.
Partly as a result, new-build developments are stalling at many locations. This was reflected in the fall in the number of building permits issued in 2022 (-16%). Regulation of the mid-segment rental properties does not mean that these properties will actually be rented out in the mid-segment when they are relet. As private landlords will be increasingly inclined to sell the property, the shift of homes from the ‘more expensive’ unregulated segment to the mid-rent segment may well prove illusory in practice.
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