Amsterdam, 3 april, 2023 – The take-up of office space by tenants and buyers (for own use) in the first quarter of 2023 came to 165,000 m², which represents a decrease of 11% compared to the same period last year (185,000 m²). As a result, the office market has a cautious, yet solid start to the year 2023, which is surrounded by structural and cyclical uncertainties. Two-thirds of all admissions in the Netherlands take place in the five largest cities. With Amsterdam at the forefront. With a take-up of approximately 51,000 m², the capital accounted for more than a third of the Dutch transaction dynamics.
Some polarization has emerged in recent transaction dynamics. Top locations in the Netherlands such as the five major cities are still in demand. More in the region, the market is quieter, with little take-up outside the G5. This differentiation is visible both in locations within major cities and between the five major cities (G5) and the rest of the Netherlands. For example, the locations on the Zuidas and Amsterdam Center are particularly popular, while transaction dynamics in Southeast and Sloterdijk lag behind.
Jos Hesselink: "Office-based organizations looking for accommodation had plenty of reasons this quarter to wait and see. First, there was little high-quality office space available on the market. In doing so, available space is still going away at headline prices. The second reason is that a bleak economic wind has been blowing since the start of the fourth quarter, due to inflation, interest rate hikes and cost increases. Last but not least, many organizations do not yet have a policy on the ratio of working from home to working in the office. They have a wait-and-see attitude, with or without the help of an extension of the existing lease.
War for talent persists
Office-based organizations are in a dilemma. They clearly balance between weighing up new economic risks, such as the chance of a longer period of limited economic growth, on the one hand, and having to anticipate a continuing tight labor market on the other. In the first quarter of 2023, for example, unemployment even dropped to 3.5% of the labor force. For this reason alone, companies want to present themselves as attractive employers in order to be successful in the War for Talent.
Amsterdam comes out on top
At 63% of the national take-up, the share of the five largest office cities is considerably higher than the long-term average of around 50% and underlines the fact that leasing activity is currently concentrated in the big cities. A star performer in this respect is the office market in Amsterdam which, with a take-up of approximately 51,000 m², accounted for more than a third of the Dutch transaction dynamics. In recent years, the capital's share gradually fell from 32% in 2017 to around 20%, mainly due to a shortage of quality supply.
High rental price level
The tight market situation, on the one hand, caused a sharp increase in the rental price level. In Amsterdam, many new office buildings are under construction due to this situation. These new high-quality and above all sustainable office buildings facilitate the high transaction dynamics of today. In Utrecht and The Hague, a mismatch between the demand for high-quality office space and the available supply in the two cities has dampened take-up dynamics. Both cities apply a pre-letting requirement that hinders the rapid realization of new office buildings. Office users increasingly wish to remain flexible and therefore no longer automatically commit themselves to an office building that may take years to complete. In The Hague, a similar dynamic is at play around the station area. Many plans with a long horizon, while the office vacancy rate has been around the friction level for years. It is now difficult for many users to find suitable accommodation.
The largest transaction that was completed in the first quarter of 2023 concerns Philips' new accommodation, which will move to the Zuidas in 2025. This transaction involved 17,000 m², making an important contribution to the high Amsterdam take-up. DAS Rechtsbijstand also had a large share in the take-up by signing for the lease of 7,000 m² in the new B Vital offices in Amsterdam Zuidoost. In The Hague, the Central Government Real Estate Agency moved into 5,600 m² in a sublease situation with MN Services, becoming a co-tenant of the Zilveren Toren. Finally, three transactions (of 3,000 m²) complete the top five largest transactions: in Rotterdam, these were Visser & Smit Bouw at Waalhaven z.z. and Flex provider Element Offices in the Maastoren; in Hilversum, it was IT service provider Eiffel at Arena Park in Hilversum.