GARBE knows Europe - Country Scope Netherlands Logistics top market between tulips and windmills • Garbe Industrial Real Estate

Logistics top market between tulips and windmills

The Netherlands can look back on a long history as a trading nation. For centuries, imports and exports have shaped the kingdom’s economic activities and laid the foundation for its current position as one of the most important European logistics markets. With Europe’s largest seaport in Rotterdam, one of the major Airports in Europe and its central location, the Netherlands form the logistical heart of Europe. But how will the country be able to maintain its status as a top market in the future? Learn all about the developments on the Dutch logistics real estate market here.

Figure 1: Differentiation of the Dutch logistics real estate market into established and emerging submarkets

Key Facts Logistics Real Estate Market Netherlands (2020):

37.6 million sqm logistics space inventory

(2016-2020: +7.0 % Ø-annual growth; +9.9 m sqm)

3.0 million sqm of logistics space completed

(2016-2020: +22.0 % Ø-annual growth; +1.6 m sqm)

Q2 2021: 7.70 EUR/sqm prime rent

(2016-2020: +1.0 % Ø-annual growth; +0.30 EUR/sqm)

Q2 2021: 3.80 % Prime yield

(2016-2020: -6.2 % Ø-annual growth; -1.10 %-points)

3.6 bn EUR investment volume

(2016-2020: +13.8 % Ø-annual growth; +1.4 bn EUR)

The Netherlands: Northwest Europe’s logistics hub

With its approx. 17 million inhabitants, the Netherlands is one of the most highly developed and longest-established logistics markets in Europe with a particularly high density of users and providers. However, its special importance does not come by chance. The country between the Ems, North Sea and Scheldt has always maintained a unique relationship with water, which established its position as a trading nation and thus the origin of the logistics top market centuries ago. With a gross domestic product of around EUR 810 billion in 2019, the Netherlands is the fifth largest economy in Europe and thus one of the most important economies in the European Union. Almost 10% of the nominal gross value added comes from the transport/logistics/communication sector.

As numerous supply chains converge in the Netherlands and the country functions as the logistics hub of northwest Europe, the Dutch logistics real estate market is also established and can look back on strong development in recent decades, not least thanks to its international orientation. The country’s strategically favourable location has led to more than half of the European distribution centres of global logistics service providers being located there. Due to the Corona crisis, Dutch logistics real estate additionally rose in favour of many international investors. Although the pandemic led to a real surge in demand for logistics properties and space due to the continued crisis resistance of this asset class, the Dutch logistics real estate market was already high on the agenda of many players beforehand.

Emerging logistics regions expand the logistics market

The established logistics regions in the Netherlands have so far concentrated mainly on the areas around the larger metropolises. In particular, the areas around Schiphol Airport near Amsterdam and Rotterdam, Europe’s largest seaport, are considered logistics hubs with global significance. In addition, some regions such as Tilburg / Den Bosch, Eindhoven or Venlo are grouped around the transport corridors in a south-easterly direction. An increased concentration of logistics space can also be seen around the cities of Almere, Zwolle and Enschede. Although these areas have had a subordinate logistical importance up to now, they are well on the way to establishing themselves as logistics regions in the future due to the comparatively favourable availability of land.

Excess demand drives rents up and yields down

The Netherlands is one of the top logistics markets in Europe. However, despite a logistics space stock of almost 38 million sqm and an average vacancy rate of 3%, the supply of high-quality logistics space is scarce, especially in logistics hotspots. On the one hand, this ensures a further increase in prime rents. Since 2017 alone, the prime rent has risen by 38 % meaning 7.50 €/m². A rental price that is being called up for top properties in the regions around Amsterdam and Rotterdam. However, the strongest average annual rental growth since 2017 can be seen in the logistics regions of Eindhoven (+3.7%), Venlo (+3.4%) and Tilburg (+3.2%). On the other hand, the limited supply of space in the top regions increases the attractiveness of less established locations for occupiers and thus also for investors.

Figure 2: Development of prime rents in the Dutch logistics market

Meanwhile, investors’ increased appetite for logistics real estate in Covid-19 times also made itself clearly felt on the Dutch market, reinforcing the developments of recent years. At EUR 2.8 billion, the transaction volume was significantly below the previous year’s figure of EUR 3.2 billion. However, in view of the pandemic-related uncertainties and the current shortage of supply, this is an even more remarkable result. The strong demand led to rising purchase prices, which further fuelled the yield compression of recent years. Overall, prime yields fell by 1.60 percentage points since 2017 and stood at 3.40% in the first quarter of 2021. However, this does not detract from the growing popularity of Dutch logistics properties among investors. A detailed overview of the top rents and yields in the individual Dutch logistics markets in 2020 can be found on our GARBE Pyramid Map.

Figure 3: Development of prime yields in the Dutch logistics market

The end of the line has not yet been reached

In the logistics market segment, the Netherlands has always been one of the undisputed leading locations in Europe. Even the emergence of new logistics hotspots in Europe, EU enlargement and Brexit have not been able to change this. Due to its central European location, the large overseas ports and the good transport infrastructure, the country is of great importance for Europe-wide trade. The crisis resistance of this asset class as well as the growing e-commerce sector in turn ensure a growing demand for properties and space. Since this demand cannot be met by the limited supply in the current hotspots, both on the investment side and on the user side, there is a shift in demand to less established regions, which will also continue in the future. The planned expansion of the nationwide rail and road infrastructure will also reduce the traffic infrastructure, which is overloaded in places, and make regions that were previously less well connected more attractive. Therefore, a significant decrease in demand cannot be expected in the future. On the contrary – due to Brexit, it is assumed that British companies will settle in the Netherlands in order to serve the continental European market from here.

Five trends in the logistics real estate market in the Netherlands:

E-commerce growth and rising same-day delivery demand lead to continued diversification of qualitative demand from logistics users
Shortage of space in established logistics regions leads to increasing demand for space in previous secondary markets
Relative crisis resistance of the logistics asset class ensures increasing investor interest and ultimately a further drop in yields
Infrastructure projects will ensure an increasing supply of logistics properties on the investment market in the medium to long term by making new locations more attractive.
Increased importance of ecological aspects and increased interest in sustainable solutions on the tenant and investor side

Almost nationwide transaction activity in the Dutch logistics real estate market

Figure 4: Development of investment hotspots in the Dutch logistics market

5 questions for our expert

Thanks to its central location, top infrastructure and overseas ports, the Netherlands is considered the logistics hub of northwest Europe. These are reasons why GARBE Industrial Real Estate GmbH has been active in the Netherlands for over 15 years. With the opening of its Amsterdam branch in 2020, GARBE paid further tribute to the importance of the Dutch logistics market. We asked Maurits Smit, Managing Director of GARBE in the Netherlands, why the potential of the Dutch logistics market is far from exhausted.

FIVE QUESTIONS FOR OUR EXPERT

The immense importance of our market for the European logistics sector actually makes it impossible not to pay special attention to the Netherlands. Maurits Smit, Managing Director Netherlands GARBE Industrial Real Estate Netherlands B.V., explains why.

1. Germany Trade & Invest 2020, Economic Data Compact. Netherlands. November 2020.
2. Germany Trade & Invest 2020, Economic Data Compact. Netherlands. November 2020. Communication is listed in the statistics in the same class as transport.

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GARBE knows Europe – Country Scope Netherlands Logistics top market between tulips and windmills