German funds are snapping up Dutch commercial properties, accounting for 47% of office investments in the first half of 2012, as the country’s markets experience a favourable outlook

According to Savills latest research report on the Netherlands commercial real estate markets the first half of 2012 saw a total office investment volume of €1.1 billion, a rise of 36% compared with the same period of 2011. The firm said that this increase is largely due to Chalet Group buying the Philips High Tech Campus in Eindhoven for €425 million.
 
The report states that overall investment volume across office, industrial and retail sectors decreased by 10.1% year on year to €1.63 billion, from €1.81 billion in the first half of 2011. Savills expects the total investment volume in the Netherlands to reach €3.2 billion by the end of 2012, slightly below the 2011 total of €3.4 billion.

‘Whilst the overall investment volume in the Netherlands has decreased in the first half of 2012, investor interest in prime commercial property remains high. Forced sales will continue to come to the market in the second half of the year and into 2013, creating further opportunities for value added investors and private equity funds,’ said Jeroen Jansen, head of research at Savills in the Netherlands.

In terms of yields, Savills finds that financing constraints and limited liquidity in the market has forced prime office yields up by 20 to 50 bps in the last six months to between 5.6% and 5.9% net yield in the four largest agglomerations. Prime industrial yields have also risen on average 25 bps in the major markets, to for instance 7.25% in the Amsterdam/Schiphol area.
 
Savills said that that the increase in both these sectors makes them more attractive to opportunistic investors and highlights the purchase of the distressed Uni-Invest and Orange office and industrial portfolios by private equity funds in the second quarter of 2012 as evidence of this.
 
Prime high street retail yields, on the other hand, have decreased by 25 bps to 4% in the city centre of Amsterdam in the same time period, showing continued interest for this type of product.

In the lettings market, due to a weak second quarter in the Netherlands, Savills records an overall take up volume of 1.83 million square meters in the first six months of 2012 across the office, industrial and retail sectors. This represents a decrease of 17% on the first six months of 2011 which saw take-up volumes of 2.20 million square meters.

Similar to the investment market, the office letting market recorded the best performance of all the sectors in the first half of 2012, with take up reaching 705,000 square meters, a decrease of 6.9% from the same period in 2011. The majority of office deals were concentrated in Holland’s key cities of Amsterdam, Rotterdam, The Hague and Utrecht.
 
In all, 11 out of the 15 largest office transactions in the first half of the year took place within these markets, predominantly in mixed use schemes in well connected locations such as the area surrounding the Arena in the Amsterdam Southeast district, which saw three key transactions conclude.

‘We expect occupier demand for prime assets to remain stable in the rest of 2012 and 2013 across all commercial markets. Prime rents should also remain steady, while rental levels at secondary locations are under downward pressure due to lower demand and increasing vacancy levels, widening the gap between prime and secondary product,’ said Coen de Lange, head of office agency at Savills in the Netherlands.

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