02 December 2020

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The dramatic ‘demand shock’ to the Dutch economy from the Covid-19 pandemic has had a widely varying impact on real estate investment sectors, but most have proven resilient and are expected to recover and show healthy and stable growth once the pandemic is behind us, Bouwinvest Real Estate Investors concludes in its annual Real Estate Market Outlook for 2021-2023. While many industries and economic sectors are experiencing stress, real estate continues to attract new investors thanks to generally supportive fundamentals and broadly favourable long-term market prospects relative to other investment asset classes, both in the Netherlands and globally.

From an economic perspective, the Netherlands found itself in a relatively sound position pre-Covid-19 compared to many other countries in Europe, due to its tradition of innovation, strong IT infrastructure and relatively low dependency on global tourism. The Bouwinvest Research team believes the Dutch market can also profit from this in the recovery phase, but the economic outlook for the Netherlands remains uncertain and the report therefore provides three alternatives. Of these, the baseline and the downside scenario including extended (partial) lockdown measures are rated as the most likely.

Residential is particularly resilient, alongside healthcare, logistics and convenience retail

The baseline scenario assumes an economic recovery in 2021 after a sharp fall in 2020. The pandemic remains broadly under control and anti-contagion measures will be relatively loose going forward with room for economic activity. In the years after 2021, economic growth is positive, albeit modest, while unemployment remains within a moderate bandwidth.

Marleen Bosma, Head of Research & Strategic Advisory, said: “Covid-19 has created uncertainties regarding the near-term prospects for the core real estate sectors in which Bouwinvest invests. Despite this, we remain broadly optimistic on the outlook for most of these, in particular residential, healthcare, logistics and convenience retail, for 2021-2023 and beyond. The residential sector, for example, has proven to be very resilient. Even in this time of crisis, Dutch house prices are still rising, driven by low interest rates and a major housing shortage. Building new homes therefore remains a key priority for the government and for us.”

Despite accelerating structural shifts, real estate will retain its attractive return-risk profile

In the hotel market, and the hospitality sector in general, the signals have gone from green to red for many operators, but Bouwinvest expects the sector to eventually rebound when people are allowed to resume normal leisure activities and (international) tourism flows return. The high street retail sector has also been hit hard by the Covid storm as the profound restructuring that was already underway has accelerated with the surge of online shopping. On the office front working from home is likely to remain at a higher level post-Covid-19, leading to lower total levels of space utilization. Nonetheless, Bouwinvest is firmly convinced that offices will continue to play an important role in the workplace in the future and expects to see demand return for well-connected locations that have been in vogue over the past decade, particularly buildings that are multifunctional, healthy and sustainable

Marleen Bosma added: “Most investors believe the real estate market will recover after the current period of volatility and uncertainty. This is borne out by the current rise in transaction volumes, following the decline triggered by the Covid-19 outbreak in the spring. The reality is that there is still a lot of investment capital waiting in the wings and real estate offers an attractive risk-return profile for the coming years.”