International real estate advisor Savills confirms in its summer 2009 Netherlands office research that tenants throughout the country are set to benefit from growing incentives into 2010 as landlords recognize the need for flexibility in order to attract and retain occupiers.
The report notes that Amsterdam in particular has seen prime rents fall from 370/m² (34/ft²) in July 2008 to 340/m² (31/ft²) in July 2009, primarily due to forthcoming completions of new stock, and in addition incentives on 10-year leases have moved from 10% to a current figure of 15-20%.
In addition, with many companies placing relocation or expansion plans on hold, tenants have been looking to renegotiate more attractive lease terms. Savills reports that of the 50 largest transactions in the first half of 2009, 25 were lease renewals compared to just seven in the same period of 2008. This is a trend that is set to continue into 2010 as tenant retention becomes an every increasingly important factor for landlords.
Coen de Lange, head of office agency at Savills Amsterdam, comments: "The Dutch property market is currently at the bottom of a property cycle with low take-up, rising supply and a quiet investment market."
Assessing the four major cities only The Hague is performing well with take-up so far reaching 50% of the total achieved in 2008. However, this is largely due to the 20,000 m² (1,858 ft²) relocation of the Tax Office to the Prinsenhof. Take-up in Amsterdam, Rotterdam and Utrecht is significantly down on 2008 figures.
With regard to the development pipeline, Savills' research confirms that the total volume of office space in the pipeline until 2012 exceeds 9 million m² (96 million ft²), although part of this is expected to be postponed or cancelled entirely. Analysis of projects currently under construction indicates that at the year end a further 400,000 m² (4.3 million ft²) of new offices will be delivered which, as a reflection of the market, is significantly lower than in recent years.
The current vacancy rate stands at 11.3%, which is a percentage point lower than 2008, however the current weak demand could reverse this trend in the future. Looking at the submarkets across the Netherlands, there are substantial differences with low rates particularly visible within the ring road on urban locations such as city centers.
With regards to the Netherlands office investment market, overall levels have plummeted with total transactions for the first half of 2009 standing at 520 million. Full year transaction figures for 2009 are estimated to be between 1 billion and 1.5 billion, compared to 3.1 billion over the full year in 2008.
The research advises that recent investments in Rotterdam and Amsterdam suggest that prime yields (on 10-year leases) are very similar to levels recorded in the same period for 2008 at 5.3% (5.5% in 2009 Q2). Secondary yields however have increased by 80 bps or more indicating that the gap in risk perception between prime and secondary stock has clearly widened.
Jan de Quay, head of investment at Savills Amsterdam, comments: "Investor activity in the Netherlands has significantly slowed mainly due to financial restrictions and the economic uncertainty. Looking forward, we anticipate that the investor market will start to grow again in the second half of 2010 as we see signs of recovery throughout the economy."