Market Reports

Low office take-up in Q3 2016

Economic growth in Amsterdam should slow in 2016 with a 1.7% increase, hardly higher than Netherlands GDP growth (1.5%). Employment growth is still very dynamic at almost 2% in 2016 in Amsterdam (1.5% for Netherlands). Nevertheless, with only 110,300 m² transacted during the first 9 months of 2016, Amsterdam’s office market dropped 35% compared to the same period in 2015. After a weak Q1 and a catch-up Q2, the office market stalled in Q3, due to a drop in large size unit transactions (11,900 m² in 2016 vs. 65,000 m² in 2015). By the end of the year a catch-up is expected again, although projected total take-up for 2016 looks like it will be 25% below long-term average.

Vacancy stabilises

2015 saw a sharp contraction of the vacancy rate below the 15% threshold, from 17.3% to 14.7% due to the improvement in occupier demand, and the withdrawal of a significant number of outdated and vacant office buildings from the market: they will be converted, mostly into residential properties. The vacancy rate will keep on reducing in 2016 down to 14.1% despite lower take-up volumes. Indeed, the stock will also increase due to the completion of two buildings although its effect on vacancy will be neutral because they are fully pre-let. New completions are expected in 2017 that will probably be compensated by the withdrawal of vacant offices as transformation goals set by the city council are at 60,000 m² for this year. A slight decrease in in the vacancy rate is expected for 2017. The prime rent slightly increased in 2016 to €370/m²/year.

The Dutch real estate market remains appealoing for investors

After two years of buoyant activity, the investment market in Amsterdam showed continued momentum in 2016. With € 511 m invested, Q3 2016 achieves a record third quarter in the past 10 years. Over the 9 first months of 2016, € 1,270 m were invested, which is comparable to 2014 and 2015 levels over the same period of the year. At national scale, despite a slight decline in Q3, the investment volume is stable over the nine first months compared to 2015, driven by office deals that represent more than half of the volume invested. A great Q4 is expected. The investment market is still animated by foreign investors that represent more than half of the amount invested. American, British and French players lead the way in 2016. Prime office yields went below the 5% threshold to 4.75%.