Dutch commercial real estate returned 0.0% in the second quarter of 2013, according to the IPD Netherlands Quarterly Property Index, showing no improvement on the 0.0% returned in Q1, and only a slight growth on the -0.1% delivered in Q4 2012. Total return for the last 12 months was 0.4%, while the annualized 5-year average was 1.5%pa.
In comparison with other asset classes the index outperformed both bonds at -2.4%, and property equities, whose returns fell to -9.1% (JP Morgan 7-10 years/MSCI). However, commercial property was unable to match the returns of equities, which delivered 1.8% over the quarter (MSCI).
Property values fell by -1.3% in the second quarter, a slight improvement on the -1.4% decline seen in Q1. Income returns slowed to 1.3% for the same period, down from 1.4% in Q1, as vacancy rates increased over the first half of the year.
Total returns in the residential sector (the largest sector in the index), were almost steady at -0.2% in Q2, compared to -0.1% in Q1, while offices saw an improvement, returning -0.6%, compared to -0.9% in Q1 2013. The retail sector, still the only major sector with a positive return, delivered 0.6% in Q2.
Capital depreciation remains the determining factor for the low total returns. While the retail and residential sectors are seeing a steady depreciation, the office sector is actually seeing a positive trend with decreasing depreciation. The only sector seeing rental value growth is residential, where rents rose by 0.2%.
Arnoud Vlak, Executive Director & Head of BeNeLux, IPD, said, “Despite the slowing returns off the back of capital declines, property continues to deliver a stable income stream, which in light of the volatility of equities and low yields of bonds, now continues to prove its use as an asset class even more.
“The residential market is a prime example of this, with capital values 18% lower than at their market peak in Q3 2008, but since then both gross income and rental values have increased by 8% and 11% respectively over that period.”