Institutionals The future of the Amsterdam office market | Institutionals
13.06.2023 • 5 Reading Time
Amsterdam is not only popular with tourists, but also with companies internationally. This means that the city has a lot to offer not only culturally, but also in terms of business. And the real estate market, too, offers opportunities that companies such as Commerz Real – and their investors – can benefit from.
A city with many facets
The cosmopolitan and liberal metropolis, known for its picturesque canals and long history as an important trading centre, attracts millions of people from all over the world every year. The Dutch capital is such a popular destination that a tourist quota of a maximum of 20 million nights per year was introduced in 2021 – with a population of less than one million.
This reduces the number of annual holidaymakers by as much as ten percent. The aim is to combat what is known as "overtourism", which has established itself at many popular travel destinations around the world, especially after the coronavirus pandemic.
In addition to tourists, numerous international companies have also set up branches in Amsterdam. They are drawn by an open economic and social climate as well as top-notch transport links.
This reduces the number of annual holidaymakers by as much as ten percent. The aim is to combat what is known as "overtourism", which has established itself at many popular travel destinations around the world, especially after the coronavirus pandemic.
In addition to tourists, numerous international companies have also set up branches in Amsterdam. They are drawn by an open economic and social climate as well as top-notch transport links.
Challenges and opportunities
In 2020, the coronavirus pandemic cast a shadow over the city. Numerous shops and restaurants closed, offices stood empty. Where possible, work continued from home. But Amsterdam and its inhabitants were prepared for such a situation: working from home was popular in the Netherlands long before the pandemic and was easy to implement thanks to good technical connectivity.
Despite the pandemic, the Dutch office market is robust. Even before the coronavirus, supply was short and demand was high, as large volumes of office space were taken from the market in previous years. As a result, vacancy rates in 2019 were at a low point since the financial crisis, particularly in attractive locations. In the renowned Zuidas office district in Amsterdam, for example, the vacancy rate in the third quarter of 2019 was just 1.5 percent.
The initial situation was therefore extremely promising, meaning that long-term negative effects of the pandemic are not expected.
Despite the pandemic, the Dutch office market is robust. Even before the coronavirus, supply was short and demand was high, as large volumes of office space were taken from the market in previous years. As a result, vacancy rates in 2019 were at a low point since the financial crisis, particularly in attractive locations. In the renowned Zuidas office district in Amsterdam, for example, the vacancy rate in the third quarter of 2019 was just 1.5 percent.
The initial situation was therefore extremely promising, meaning that long-term negative effects of the pandemic are not expected.
Amsterdam is a vibrant and cosmopolitan metropolis. Its strong international orientation is its trademark and was also its handicap when everything suddenly came to a standstill during the coronavirus pandemic and many foreign guests and investors had to stay away. Nevertheless, we are certain that the office rental and investment market will recover quickly. After all, the basic requirements have not changed: the targeted reduction in vacancies has led to a shortage of supply and rising rents in recent years. Even during the crisis, rental levels remained stable, which is a positive sign for the attractiveness and future viability of the market. Interest in office space is already awakening again. Modern areas at top locations are still scarce – and will only increase moderately in view of the cautious building permit policy.
Steady value growth, stable markets
Commerz Real, which has been present in the city since 2007, is managed locally by Martijn Houwen, a degree-qualified real estate economist. As Head of Real Estate Markets Benelux, he not only looks after the Netherlands, but also Belgium and Luxembourg.
Under his leadership, Commerz Real has been able to gradually expand its Dutch real estate portfolio in recent years. This includes a remarkable project: the 2Amsterdam, a modernised ensemble of two high-rise buildings, of which one offers around 20,000 square metres of office space. The second high-rise building, a hotel tower, was fully leased to the hotel chain “Inside by Mélia” for a term of 22 years. Special focus was placed on sustainability and energy efficiency, confirmed by the BREEAM certification of both buildings.
Projects such as 2Amsterdam are strategically upgrading the office market in the Netherlands and Amsterdam in particular. However, other developments are also contributing to the office market’s continuous increase in value: for example, between 2010 and 2015, numerous office spaces in many Dutch cities were converted into apartments and student apartments. As demand for office space increases, supply drops and rents rise. In the centre of Amsterdam, top rents reached more than 400 euros per square metre in 2019, with vacancy rates below five percent.
Regional centres such as Eindhoven and Utrecht are also experiencing increasing demand and rental prices. Eindhoven is known as a centre for IT development as well as the headquarters of electronics giant Philips and its subsidiary Signify, which generated a turnover of an impressive 6.2 billion in 2019. Utrecht scores points mainly due to its geographical proximity to Amsterdam, which offers a cheaper alternative to the capital.
Under his leadership, Commerz Real has been able to gradually expand its Dutch real estate portfolio in recent years. This includes a remarkable project: the 2Amsterdam, a modernised ensemble of two high-rise buildings, of which one offers around 20,000 square metres of office space. The second high-rise building, a hotel tower, was fully leased to the hotel chain “Inside by Mélia” for a term of 22 years. Special focus was placed on sustainability and energy efficiency, confirmed by the BREEAM certification of both buildings.
Projects such as 2Amsterdam are strategically upgrading the office market in the Netherlands and Amsterdam in particular. However, other developments are also contributing to the office market’s continuous increase in value: for example, between 2010 and 2015, numerous office spaces in many Dutch cities were converted into apartments and student apartments. As demand for office space increases, supply drops and rents rise. In the centre of Amsterdam, top rents reached more than 400 euros per square metre in 2019, with vacancy rates below five percent.
Regional centres such as Eindhoven and Utrecht are also experiencing increasing demand and rental prices. Eindhoven is known as a centre for IT development as well as the headquarters of electronics giant Philips and its subsidiary Signify, which generated a turnover of an impressive 6.2 billion in 2019. Utrecht scores points mainly due to its geographical proximity to Amsterdam, which offers a cheaper alternative to the capital.
Promising trends in the office market
The Dutch office market has proven to be quite resilient despite slumping investment revenues and declining demand for space during the pandemic. Even during the crisis, the vacancy rate rose to a maximum of 8 percent and quickly levelled off again.
Even in times of crisis, attractive locations and high-quality usable areas remain popular. The limited supply and low number of building permits ensure that demand remains at a reliable level. Under these market conditions, high-quality spaces such as Commerz Real’s 2Amsterdam development are in a privileged situation in which long-term rental and continuous income are well secured.
This, in turn, also has a positive effect on the returns of private and institutional investors who invest in Commerz Real's financial products – and thus also in projects such as 2Amsterdam.
Even in times of crisis, attractive locations and high-quality usable areas remain popular. The limited supply and low number of building permits ensure that demand remains at a reliable level. Under these market conditions, high-quality spaces such as Commerz Real’s 2Amsterdam development are in a privileged situation in which long-term rental and continuous income are well secured.
This, in turn, also has a positive effect on the returns of private and institutional investors who invest in Commerz Real's financial products – and thus also in projects such as 2Amsterdam.