Shifts in the Dutch office market

The office market in 2003 is holding up reasonably well compared to the first half of 2002. DTZ Zadelhoff’s half-yearly figures show that the take-up volume is approx. 700,000 m². The demand for office space is currently dominated by companies which want to put their accommodation in order. As a result a number of large letting transactions were concluded in the last few months.

An average of 15 to 20% of the leases are renewed or terminated each year. In the present ample market lessees are considering whether they can improve their accommodation by relocating. This is why there will continue to be upgrading in the office market, in spite of the less favourable economic situation. This is evident from the market descriptions which the Netherlands’ largest commercial property agent DTZ Zadelhoff is presenting this week for the 15 largest Dutch urban regions.

Demand from the business sector is currently mainly for replacement premises or premises to concentrate their business. The result is that a similar floor area is put into use compared to that which is vacated. The need for companies to increase their office space is only limited, although there is still some need in the government sector. The largest transaction of the last six months concerned the letting of 48,000 m² to the General Intelligence and Security Service in Zoetermeer.

The supply of office space is not decreasing in the current market, but has risen further to a level of 5 million square metres. The rise since the beginning of 2003 is a result of new building completions. Of the total supply 3 million square metres are now being used. The supply consists of outdated office buildings as well as buildings of a more recent date in prime locations. DTZ Zadelhoff expects an increasing differentiation in rents in the next few years. Older unmarketable offices will go down in price considerably whereas rents for good office space in popular locations will hold up.

There are major regional differences in the Dutch office market. In the Rotterdam and The Hague regions less office space was let in the past six months than in the first half of 2002. Also ’s-Hertogenbosch is experiencing a decrease after years of growth. In Amsterdam the take-up level seems to have stabilized while in Zwolle demand is even growing. Even if economic conditions improve, DTZ Zadelhoff does not expect a normalization in market conditions for the whole of the Netherlands before the middle of 2006. If employment with banks, insurance companies and telecoms companies should decline even further â€" as shown in the labour forecast of the Central Organization for Work and Income (CWI) for 2003 to 2008 - then this moment may be an even more distant prospect.

Much demand and supply in the commercial property market
The open market for commercial space turns out to be less sensitive to the present economic situation. The demand for commercial space remains high, as a result of which the expected take-up in 2003 will increase by 20% compared to 2002. In the first half of 2003 a number of large-scale transactions was registered, primarily in logistic complexes. In small and medium-sized businesses there is mainly a replacement demand in combination with a demand for improved quality. DTZ Zadelhoff estimates a third of the 6 million square metres to be outmoded and very difficult to let. The commercial property market consists for a large part of owners/occupiers. The economic decline is making itself particularly felt within this market segment. Due to overcapacity of owner-occupied premises there is a tendency among multinationals to sell their large plants and lease back all or part of the space.

Demand for property investments remains high
The demand for let property for investment is currently very high. According to DTZ Zadelhoff there is a large demand from investors, fed by the persistent uncertainty on the stock exchange. Private investors as well as German investment funds in particular are actively looking for solid investment properties. Due to the

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