THE NETHERLANDS OFFICE MARKET

March 2014
Contents
1.
Take-up of
offices
2.
STATE OF AFFAIRS
THE NETHERLANDS
OFFICE MARKET
Supply of
offices
3. 
Office rents
4. 
Office
investments
I
Colofon
Composition
Drs. R. L. Bak
Data source
NVM Data & Research, Nieuwegein
Design
Proof Studio,
Amsterdam
Photography
Jurjen Drenth,
Hollandse Hoogte
n 2013, the office market in the Netherlands was
still dealing with some very serious challenges.
The occupational market in particular was
having a bad time indeed. Due to unfavourable
economic conditions, last year quite a few companies
were compelled to proceed more efficiently and push
down costs. These savings led to poorer demand for
office space. As a result, vacancy rates continued to
climb unabated. Demand for office space tumbled
down for the seventh time in a row.
According to calculations performed by NVM Busi
ness, the supply and demand gap has never been this
vast as in 2013. While the number of offices available
for rent increased by approximately 6% last year,
demand for office space dropped by almost 11%.
Hence, availability levels were almost ten times as
high as the demand. The supply and demand ratio
deteriorated in many areas, although this was felt
most strongly in the Randstad area and also east of
the country. In Randstad, it was primarily the city of
Rotterdam that witnessed stagnation of demand
while supply levels mounted considerably.
Due to greater discrepancy between supply and
demand, office rents were under even more pressure
in 2013. In fact, they continued to drop fast. Not
only did the existing offices have to settle for less,
the average rents obtained for newly developed
offices went down as well. Nevertheless, a few areas
did manage to hold on to their price levels (e.g.
South Axis in Amsterdam, The Hague’s Central
Station area).
Even though the overall picture of the office market
was hardly encouraging, and the sense of apprehen
sion about a possible recovery intensified, a few rays
of hope presented themselves nonetheless. One of the
factors that did propitiate the market was in fact the
rising number of office square metres withdrawn
from stock after demolition or redesignation. Also,
last year investors were slightly more interested in
offices compared to the year 2012, although one needs
to comment that demand primarily followed from
foreign investors’ buyer interest. Dutch investors,
however, kept aloof.
1. OFFICE TAKE-UP
Transaction volumes further down
Last year the office market once again had to settle
for poorer demand volumes. It is because companies
and organisations were less inclined to relocate,
pushing transactions volumes even further down. In
the open market, representing both investors and
property developers, approximately 830,000 m² of
office space were taken up (2012: 930,000 m²). Most
offices involved existing stock, with lessees being
interested in medium-sized spaces (1,000 m² to
5,000 m²) in the first place. Minor lease transactions
(up to 1,000 m²) equalled approximately 25% of the
total demand for offices, a serious drop compared to
the year 2012. Nevertheless, the take-up percentages
of large floor areas were rather high, thanks to lease
transactions with e.g. Achmea, CB&I, Hogeschool
Utrecht, Nauta Dutilh, Rabobank, Stibbe and TNO.
The state of affairs in the office market was also
marked by the fact that the government, a major user
of office space, hardly showed up in 2013. Most offices
were claimed by business service providers, the
banking and insurance industry, IT and the manu
facturing industry.
An eye-catching role for the city of
Eindhoven
Last year, transaction volumes dropped particu
larly in Randstad. For instance, demand for offices
diminished in Rotterdam and the Schiphol region.
And yet, opposing tendencies were clearly visible
in the city of Rotterdam because despite positive
developments at the city centre, take-up levels were
quite disappointing on the outskirts of the city. In
Amsterdam, last year less office space was let or
sold but still, taking the total transaction volumes
(190,000 m²) into consideration, a positive mood was
sensed nonetheless. In the Dutch capital, parties
were mainly interested in South Axis’s offices and
also in buildings in the very heart of the city. One
interesting detail is the fact that in South Axis more
new complexes were let compared to previous years.
Against all expectations, The Hague and Utrecht did
succeed in keeping sales volumes steady as in both
cities, the same amount of office space was taken up
as in 2012. As for the rest of the country, a prominent
role was claimed by the city of Eindhoven where,
following transactions with inter alia Rabobank and
chip machinery maker ASML, much more floor area
was taken up. Other cities outside the Randstad area,
however, saw take-up levels tumble down. According
to NVM Business data, the cities of Arnhem,
Den Bosch and Groningen had to put up with the
largest decline in demand.
TAKE-UP OF OFFICE SPACE ACCORDING TO BUILDING TYPE
m2
1,800,000
1,500,000
1,200,000
900,000
600,000
300,000
0
2004
2005
2006
2007
2008
2009
new development
2010
2011
2012
2013
existing building
Source: NVM
TAKE-UP OF OFFICE SPACE
BY REGION 2013
South
15 %
TAKE-UP OF OFFICE SPACE
BY SIZE CATEGORY 2013
East
5%
200 – 499
8%
10,000 and more
12 %
Amsterdam
23 %
500 – 999
15 %
5,000 – 9,999
16 %
6%
North East
The Hague
8%
10 %
Central other
Rotterdam
6%
10 %
West South other
8%
West North other
19 %
2,500 – 4,999
Utrecht
9%
Source: NVM
30 %
1,000 – 2,499
Source: NVM
TAKE-UP OF OFFICE SPACE BY REGION
m2
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2003
2004
West North
2005
2006
West South
2007
Central
Source: NVM
NVM BUSINESS THE NETHERLANDS OFFICE MARKET
2008
2009
North East
2010
2011
East
2012
South
2. SUPPLY OF OFFICES
Higher vacancy rates in many
Dutch cities
In addition to poorer demand for offices, last year’s
rising vacancy levels have thrown this market off
balance even more. Office space available for imme
diate occupation increased by 6%, going up from
7.84 million m² to no less than 8.32 million m². Hence,
at year-end 2013 approximately 16.8% of Dutch
office stock was available for rent or sale compared
to 15.8% a year earlier. According to NVM Business,
last year many cities had to face mounting avail
ability levels. In Randstad, a serious rise occurred
in cities like Amersfoort, Amstelveen, The Hague,
Dordrecht, Haarlem and Rotterdam. In The Hague,
higher supply to a great extent was the result of
several large government buildings being added
to the market. And in Rotterdam and Amersfoort,
Nationale-Nederlanden and Achmea respectively
were responsible for a serious increase as both insur
ance companies decided to use less floor area. Even in
Amsterdam, the amount of space available for rent
went up, although vacancy rates remained reasonably
within limits. Interestingly enough, the amount of
offices offered in the city of Utrecht remained almost
the same. Outside Randstad, the cities of Apeldoorn,
Arnhem, Den Bosch, Groningen and Zwolle clearly
had to suffer a great deal as office supply volumes
increased strongly in these cities.
Structural vacancy is becoming a
serious problem
Last year’s rising structural vacancy levels also had
great impact on the office market. Towards the end of
2013, 47% of the total office stock had been available
for rent or sale for more than three years. Structural
vacancy is becoming a serious problem particularly in
the cities of Amsterdam, The Hague and Rotterdam.
In Amsterdam, structural vacancy involves at least
half of all floor area offered for rent or sale.
SUPPLY OF OFFICE SPACE ACCORDING TO BUILDING TYPE
m2
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2005
2006
2007
2008
2009
new development
2010
2011
2012
2013
existing building
Source: NVM
SUPPLY OF OFFICE SPACE
BY REGION 2013
South
13 %
East
7%
Amsterdam
13 %
SUPPLY OF OFFICE SPACE
BY SIZE CATEGORY 2013
10,000 and more
16 %
500 – 999
10 %
The Hague
7%
North East
8%
Rotterdam
9%
20 %
5,000 –
9,999
29 %
1,000 –
2,499
5%
Utrecht
12 %
Central other
14 %
West South other
12 %
West North other
Source: NVM
25 %
2,500 – 4,999
Source: NVM
SUPPLY OF OFFICE SPACE
BY AGE 2013
0 – 2 years 3 – 7 years
1 % 6 % 8 – 12 years
7%
More redesignation and less demolition
Fortunately, in 2013 more vacant offices (approx.
385,000 m² in total) were either demolished or
converted and hence withdrawn from stock compared
to the year 2012. Not only the cooperation between
the authorities and the private sector which NVM
Business advocates contributed to the large number
of withdrawals, but also the fact that investors and
financiers were prepared to considerably depreciate
their vacant premises. Unlike in previous years, more
offices were withdrawn in order to transform these
into homes. Another striking fact is that last year less
office space was demolished. NVM greatly supports
redesignation of vacant offices.
2004
20 %
13 – 17 years
66 %
18 years
and older
Source: NVM
NVM BUSINESS THE NETHERLANDS OFFICE MARKET
3. OFFICE RENTS
Average rents seriously down
It should not come as a surprise that, as demand
levels spiralled downwards and availability increased
at the same time, office rents were under even more
pressure in 2013, crashing down impressively for
the first time in years. This fall in prices has affected
both old and new offices, whereby existing property
had to face the strongest decline. Last year, once
again it remained to be seen whether the available
data are indeed complete. It is because quite a few
investors are reluctant to provide information on
lease transactions they have entered into. In addi
tion and like in previous years, investors have been
offering incentives on a large scale, making it almost
impossible to clearly monitor the price-making
process.
AVERAGE RENTS OF OFFICE SPACE
180
170
160
150
140
130
120
110
100
2006
2007
2008
2009
2010
new development
2011
2012
2013
existing buildings
Source: NVM
Regional differences
Even tough last year all regions of the country were
facing rent reductions, there were some undeniable
differences as to the extent to which rents dropped.
For instance, in central and south Netherlands
average rents went down by approximately 8%, while
office rents dropped by 2% on average in much of the
province of South Holland (West South region other).
As for the four largest cities of the Netherlands, last
year Amsterdam was the only city that succeeded in
keeping rents steady, which contrasted with the high
office vacancy rates. In the Dutch capital, in fact it
was even possible to obtain higher rents at the more
expensive end of the market.
AVERAGE RENTS OF EXISTING OFFICE SPACE BY REGION
160
145
130
115
100
2004
2005
West North other
2006
2007
2008
West South other
2009
2010
Central other
2011
North East
2012
East
2013
South
200
180
160
140
120
100
2004
2005
Amsterdam
2006
2007
2008
The Hague
Source: NVM
NVM BUSINESS THE NETHERLANDS OFFICE MARKET
2009
2010
Rotterdam
2011
2012
2013
Utrecht
4. OFFICE INVESTMENTS
Randstad, the all-time favourite area
Strangely enough, investors were not put off by
the gloomy conditions dominating the Dutch office
market. In fact, they were even more interested
in offices, which is evidenced by the rising trans
action volumes. Trusting the data available on sales
and acquisitions are complete, last year investors
spent approximately € 1.48 billion on office build
ings (2012: € 1.04 billion). One remarkable detail is
the fact that in 2013, mainly German and American
investors were involved and also that – judging
by transaction volumes – they were particularly
interested in Amsterdam, The Hague, Rotterdam
and H
aarlemmermeer (Schiphol region). In addi
tion to an unmistakable preference for the Randstad
area, NVM also found that last year parties were
more interested in new offices. This rise to a great
extent follows from two sizeable new development
projects in South Axis (Amsterdam), worth almost
€ 150 million in total. Also, last year investors were
interested in large offices, the floor areas of which
cover at least 5,000 m².
Foreign investors take the lead
Foreign parties invested a total of approximately
€ 1.24 billion in office buildings. These investors were
also very much involved in selling buildings, having
to accept serious losses every now and then. Although
last year foreign investors represented most acquisi
tions, Dutch investors showed up as well. These are
private investors in the first place, given the fact
that institutional investors were to a limited degree
encouraged to buy property in their homeland.
Yields go up
Investors’ greater interest in offices did not stop the
gross initial yields from rising even further, not only
in Randstad but in other parts of our country as well.
Growth equalled 35 basis points on average, that is
0.35 percentage point. Only the best office locations
in Randstad managed to escape this less positive
development, where initial yields remained almost
the same or in fact they even went down in some
cases (e.g. in Amsterdam).
OFFICE INVESTMENTS ACCORDING TO BUILDING TYPE
x million
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
2009
new development
2010
2011
2012
2013
existing buildings
Source: NVM
OFFICE INVESTMENTS BY
REGION 2013
Central other 1 %
West South other 5 %
OFFICE INVESTMENTS BY
SIZE CATEGORY 2013
East South
5% 4%
1,000 – 2,499 2 % 2,500 – 4,999 5 %
5,000 –
9,999
22 %
West North other 7 %
Utrecht 2 %
Rotterdam 4 %
The Hague 9 %
10,000
and more
71 %
Amsterdam
63 %
Source: NVM
Source: NVM
AVERAGE GROSS INITIAL YIELDS OF OFFICES
%
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
Source: NVM
2004
2005
Randstad best locations
2006
2007
2008
Randstad other locations
NVM BUSINESS THE NETHERLANDS OFFICE MARKET
2009
2010
The Netherlands other best locations
2011
2012
2013
The Netherlands other other locations
DEFINITIONS
Office
A spatial and independent unit used for office activi
ties or support activities in the first place. Office
spaces that are part of industrial buildings, universi
ties or hospitals are not considered to be offices.
Take-up
Lease and sales transactions taking place in the open
market. Users who provide for their own accommo
dation requirements (the so-called owner-occupier
development) are not included in the take-up volume.
The same applies to sale-and-leaseback agreements
as well as contract extensions. NVM registers trans
actions starting at 200 m².
Rent
The basic rent obtained for each square metre of
lettable floor area, exclusive of VAT, service charges
and lessees’ specific furnishing expenses.
Gross initial yield
The gross annual rent upon acquisition as a
percentage of the total investment.
Supply
Office space immediately available for rent or sale.
Supply does not include offices under construction
and which are yet to be built. Supply includes vacant
and developing offices as well as spaces that are still
being used but which are soon to be released. Supply
is measured in buildings providing at least 500 m².
NVM-REGION-DIVISION
West North
West South
Central
North East
East
South
NVM BUSINESS THE NETHERLANDS OFFICE MARKET

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