FGHâ€™s Vastgoedbericht 2002, which was published last week, describes the effects of changing environment in relation to real estate. Also due to economic developments the market has seen a move from a suppliers market to a buyers market.
The real estate bank does not expect major complications, at least short term. This will only apply if the economy does not recover longer term. However, for the time being this is not anticipated. For now, the quality and accessibility of locations will continue to be the critical factors.
The real estate sector will have to learn to deal with a market, which does not grow so fast and with the waiting game of potential new tenants of commercial real estate. According to the FGH Bank this will be very noticeable on the office and industrial real estate markets, and to a lesser extend in the retail market. Apart from the increase in supply (40%), the increase in office space in the sub-let market was very remarkable.
It is not very likely that massive vacancy rates in new developments will dominate the market in the near future, as little so-called risk-development is taken place. Abandoned, not up-to-date office complexes will remain difficult to let out, and its is very likely that vacancy will increase in this segment.
The industrial real estate market continues to show signs of saturation. Vacancy rate increased in the existing stock, despite the limited development volume. Supply is difficult to rent out and the FGH Bank advocates large-scale redevelopment of older industrial parks.
The retail market settled down during 2001 enabling rental prices to settle down too. Over the next few years retailers in the smaller district shopping centers will experience exiting times. If consumer spending slows down they will have difficult times. The increased availability in PDV/GDV locations will only contribute to their ordeal.
Finally, the real estate investment market was very dynamic during 2001, mainly due to the divestments of large real estate holdings by institutional investors. Real estate is an attractive investment alternative in relation to the negative performance of the stock markets around the world. Higher net yields and low interest rates makes investments in real estate more interesting. FGH Bank expects a further increase in yields, mainly due to the economic slowdown.
For further information please visit www.fghbank.nl.