AMSTERDAM, January 2, 2023 – 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. As of the third quarter, the hitherto very positive post-corona sentiment in the office market has given way to uncertainty among office holding organizations due to current cost increases and the economic outlook for 2023. Last year, Amsterdam and especially Rotterdam had a large share of the nationwide recorded transaction dynamics. This is because demand has focused on high-quality office space in the top locations of the Netherlands.
Office users show a scattered picture across the board. While 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, Cushman & Wakefield is actually seeing a lot of momentum on the public sector side. The sector has used the recent period to further shape the return to office.
Jos Hesselink, Netherlands Research Lead Cushman & Wakefield: "As long as economic risks continue to hang over the market in 2023, this situation will continue: muted absorption dynamics in a stable supply situation. Existing leases - outside prime locations - will be renewed on favorable terms, while very little office space will become available again on the market."
Stagnant tenants with continued transformation pressure causes slight decrease in supply and unchanged vacancy rates
The supply of available office space at the end of 2022 is 4.3 million m², of which 3.9 million m² is offered in physically vacant condition, resulting in a vacancy rate of 8.2%. The rate has fluctuated between 8.2% and 8.4% since the corona pandemic. The cause for the slight decrease in the supply of office space with a more or less unchanged vacancy rate therefore mainly shows the reluctance of incumbent tenants to give up (too much) office space, because staff increasingly know how to find their way back to the office and, on the other hand, the desired high-quality office floors in prime locations are not available. Another cause of the decline can also be found in the transformation pressure to other functions such as residential, which is causing more and more office space to be withdrawn from the market. Several office buildings have also been taken off the market this year to serve as (temporary) refugee shelters.
The major cities all recorded lower vacancy rates than the national average. The tightest office markets this year are again found in The Hague and Utrecht with vacancy rates of 5.1% and 5.5% respectively, while Amsterdam (7.2%) and Rotterdam (7.3%) have significantly more office space available. The availability of office space at all also largely explains the relatively high absorption in Amsterdam and Rotterdam on the one hand and the more muted absorption dynamics in Utrecht and The Hague on the other. Take-up in the latter two cities could have been higher if there had been sufficient suitable supply available.
Jos Hesselink: "The obligation of minimum energy label C throughout the Netherlands plays an important role in the uptake of office space. Many office users want to have their accommodation in order in anticipation of possible enforcement by local authorities and therefore, partly in line with their sustainability policy, are looking for high-quality and therefore mostly sustainable office space."
New housing requirements limit supply in prime locations in G5
With 51% of the national take-up, the share of the five largest office cities is slightly above the long-term average. In the Amsterdam office market, the diffuse picture has led to selective demand pressure, especially in the top locations of Amsterdam Center and Zuidas. With an absorption of 202,000 m², the city closed the year stable, in line with 2021 (221,000 m²) and 2020 (175,000 m²). Demand for high-quality office space has put upward pressure on rental rates. Although rent increases have been realized throughout the Netherlands as a result of (indexing) inflation, in Amsterdam there is a fight for scarce office space that meets new post-corona housing requirements: a representative office building where meeting is central, perfectly accessible by public transport and strategically located near talent.
The Rotterdam office market shows a remarkable advance with an absorption 110,000 m², accounting for 12% of the national office absorption. Never before has the port city's share been so high. In addition to the search for high-quality, strategically located and sustainable real estate, this take-up is also evidenced by the increased rent levels in Rotterdam at prime locations.
The office markets in Utrecht (7%) and The Hague (7%) have not seen major changes in share, but this seems to be more related to a mismatch between demand for high-quality office space and the current available supply in the two cities. In Utrecht, all recently completed office space has now been leased and the intended completion dates of new office buildings are not yet known or will be delayed for some time. The pre-leasing requirement of the municipality of Utrecht is playing tricks on the rapid completion of new office buildings. Office users increasingly wish to remain flexible and therefore no longer automatically commit themselves to an office building whose completion can sometimes be years away. In The Hague, a similar dynamic plays out 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 becoming difficult for many users in The Hague to find suitable housing.
Rijksvastgoedbedrijf responsible for largest transaction in 2022
The largest transaction of 2022 comes in the name of the Rijksvastgoedbedrijf, which purchased about 20,000 m² at Maanplein in The Hague for various government departments. The cultural social meeting place Microtuin in Eindhoven, a joint venture between Microlab from Eindhoven and the Stadstuin from Utrecht, follows with a leased area of about 17,000 m² in the centrally located Knoop XL. In Rotterdam, JEX Technology Group will be the new occupant of the former Unilever headquarters De Brug. With this, the iconic building (15,000 m²) once again houses a real Rotterdam company. Also in Rotterdam, Shell moved into approximately 7,200 m² of office space in Delftse Poort. In The Hague, energy group TotalEnergies took up approximately 7,500 m².