According to the research report ‘Market in Minutes – The Netherlands Q2 2018' published today by international real estate advisor Savills, the current commercial real estate market across the region is more balanced than it was in 2006-2007. The report compares the fundamental characteristics of the real estate market of 2006-2007 with today’s market, identifying three major differences driving a positive outlook.

1)    On-going yield gap

Currently, the Netherlands is benefiting from a relatively low long-term interest rate of 0.69% in combination with a yield of 3.5% on prime commercial real estate. This results in a yield gap of 2.8%. Compared to the situation in 2006-2007, this is significantly better due to the long-term interest rate standing at 4% during those years, resulting in no yield gap at all. Savills notes that even if interest rates should rise, there would continue to be a structural yield gap.

2)    Ongoing inflow of capital from all over the world

Because of the stable economic situation, foreign investors in particular see the Dutch market as attractive. In Q1 2018, around 64% of total investment was cross-border investment. The origin of that capital is also much more diverse now than it was ten years ago due to the increase in investments from Asia and the Middle East. This makes the inflow of capital into the Netherlands more stable than ever.

3)    Smaller stock of real estate

Particularly in the office market, about 4 million sq m has been withdrawn over the last five years and many more conversion and transformation projects are planned. In most cities, there is now a healthier balance between supply and demand. Renewed expansion of the real estate stock is unlikely since the government is now pursuing more restrictive policies.

Clive Pritchard, Head of Country at Savills in the Netherlands, says: “In times of prosperity and economic growth, the question always remains: are we reaching the peak and could an economic downturn be approaching? The answer certainly appears to be ‘no’, since no signs of economic downturn can currently be detected. This means that certain markets can achieve further rental growth and yield compression. However, if the economy were to stop growing unexpectedly, the Dutch real estate market would be in a much better position based on the three factors described above.”

Download the full report here.