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Outlook 2023 Outlook 2023

Real estate investment market normalizes: recovery in quarters three and four of 2023

Jos Hesselink • 22/12/2022

Amsterdam, December 21, 2022 - The mild recession in the last quarter of 2022 will continue into the first quarter of 2023. For the real estate sector, international real estate consultant Cushman & Wakefield anticipates that the industry will anticipate the current economic downturn more quickly than in previous crises, allowing for recovery in the real estate market in the second half of 2023. The consultant expects buyers and sellers to find a new equilibrium faster in a market that will face average price corrections between 10-20%. In addition, positive signs in terms of inflation and interest rates provide visibility for stability and balance in the market from the third quarter of 2023. In the annual Outlook of Cushman & Wakefield for the following year, the real estate advisor provides its forecast on transaction dynamics in the various investment and occupier markets based on in-house view and transaction data. The forecast covers developments in the office, retail, residential, logistics and commercial real estate markets. 

Real estate investors have learned from previous crises that it is better to make price corrections faster during a crisis. Jeroen Lokerse, CEO Cushman & Wakefield Netherlands, says: "We are able to anticipate faster and better than expected. We see that the impact of the corona crisis has been limited on the real estate investor market. We didn't think that when corona broke out. We are also seeing in other crises that we are able to act quickly and adequately, which means that the investment market is also normalizing more quickly. This inspires confidence and I therefore expect a recovery in quarters three and four of 2023."

Office market stable, though polarization based on quality between segments

Cushman & Wakefield sees investors feeling strengthened by the so far limited impact of the corona pandemic on demand for office space. By 2023, investors are expected to be more selective, but to offer good prices for high-quality available supply on the market. With this, the office investment market in 2023 will be dominated by quality-based polarization between the high-end and sustainable offices in prime locations on the one hand and the value-add segment in secondary locations on the other.

Jos Hesselink, Netherlands Research Lead Cushman & Wakefield: "Office users show a scattered picture across the board. Whereas commercial organizations such as business service providers and/or the creative industries are struggling with the cost of accommodation versus the need to attract talent, on the public sector side we see a lot of dynamism. After all, they have no or less to contend with issues such as profit warnings and have used the recent period to further shape the return to office.

The (very) large office-based organizations appear to be especially reticent about the hybrid workplace strategy (to be) implemented. More time is being taken by these organizations to properly understand its impact on the organization through occupancy and employee surveys. As long as economic risks continue to hang over the market in 2023, this situation will continue: muted absorption dynamics with a stable supply situation. Existing leases will be renewed - outside of top locations - on favorable terms, while very little office space will be 'given back' to the market, as there is a risk that too much space will eventually be divested that will then have to be re-leased at a much higher price."

Housing market will remain under pressure even in 2023

The focus of national and local politics to relieve pressure on the housing market is largely on increasing the social housing stock through new construction. From figures, the real estate consultant sees that there is actually a high demand for owner-occupied and rental housing in the middle segment. Due to the large stock of social rental housing (33% of all housing) versus a limited stock of free sector rental housing (7%), the price difference between these two segments is large. As a result, many house seekers have nowhere to go: social rental housing is no longer accessible to middle-income housing seekers, while the number of affordable free-sector rental homes has fallen well short of expectations since the Housing Act was revised in 2015.

Jos Hesselink: "Increasing the housing stock in the middle and free sector should promote flow and be a crucial link in the housing stock between social rented and owner-occupied housing. With the government's intention to regulate middle renting and encourage home ownership in combination with a strong push for social housing, housing market policy does not currently focus on this. Therefore, even in 2023, we expect the housing market to remain under great tension."

Retail market: relatively stable retail rent levels due to selective demand pressure

The combination of high costs and the expected mild recession in the first quarter of 2023 makes consumers cautious about making large expenditures. Passenger flows on shopping streets have not yet recovered, and for 2023 the retail market must expect visitor numbers to be structurally lower than before the virus outbreak. It is still unclear whether this is due to the structural change process towards online shopping or more with the historically declining purchasing power of consumers.

Despite an uncertain economic outlook, retailers continue to seek new physical retail space on sought-after high streets. Investor portfolios are being optimized through relocation and consolidation. To reduce costs, less profitable stores are being exchanged for stores in prime locations on main shopping streets, and consolidation (one large unit between 200 and 500 m²) is being looked at in cities with multiple locations. Partly because of this, both existing retailers and new international retailers, are betting on equivalent retail properties with the same floor areas. This leads to a relatively stable retail rent level, especially in these larger shopping cities.

Logistics and industrial market: less new construction due to administrative measures, more pressure on existing distribution centers

The demand for logistics real estate has remained high. This despite the current tight market situation and the restrictions on new project developments due to the shortage of plots, building materials and administrative support. In 2023, therefore, the focus for investors will be on the user. Land purchases or new construction projects at risk will increasingly take a wait-and-see approach. Moreover, an additional obstacle for new construction is the removal of the construction exemption in the Nature Protection Act due to the ruling of the Council of State in November 2022. Since last year, this exemption ensured the smooth granting of building permits, because nitrogen emissions during construction activity no longer had to be taken into account. Now that this exemption does not appear to comply with European nature protection law, in the case of new construction, the potential impact of nitrogen emissions must again be investigated on a project-by-project basis through a nitrogen calculation before a permit can be granted. This could lead to fewer new construction projects in 2023 and more pressure on existing distribution centers.

More News

The Office Market has a Cautious Start in the First Quarter of 2023

Quarterly Cushman & Wakefield figures show a relatively stable market.


Waiting attitude of office users leads to muted absorption dynamics in the Dutch office market

Figures from international real estate consultant Cushman & Wakefield show that the take-up of new office space over 2022 reached 967,000 m2. This puts the recorded transaction dynamics slightly lower than at the end of last year (-7%), but in line with the office dynamics observed since 2020.



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