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October 24, 2017

Amsterdam is rapidly making a name for itself as a gateway to mainland Europe with foreign capital finding favour in all sectors of real estate investment.

“In the past, Amsterdam was considered a relatively small local city, but now it is building up scale to become a global city, which is attracting overseas interest and investment,” says Sven Bertens, Head of Research Advisory at JLL EMEA.

Ten years ago, real estate investment was driven by Dutch capital, Bertens says. “Now, the majority of real estate investment in the Netherlands comes from overseas. For a growing number of overseas investors, the Netherlands is a popular gateway into European markets.”

Amsterdam’s logistics industry, for example, is entirely funded by foreign capital, while the commercial office market is supported by a very high percentage of overseas investment. As consumer spending rises, foreign investors are also sinking capital into the retail sector.

“What we are seeing in the retail market is similar to the trends of the office market three or four years ago,” Bertens says. “Consumer confidence is picking up and there’s a positive impact on retail, particularly inner city retail.”

Amsterdam has emerged as one of the frontrunners to challenge a post-Brexit London as the capital of European finance. It’s an emerging fintech sector and this coupled with the use of English as the language of business means its clout as a finance city is growing.

Business credentials aside, the city’s softer attributes such as the long-held focus on sustainability and smart infrastructure mean it’s come to define how a 21st-century world city should operate.

“The attractiveness of Amsterdam is that despite it reaching the stage of a global city, it feels like a small village,” Bertens says. “Housing is still relatively affordable and the city has beautiful architecture.”

Compared to other European world cities, Amsterdam’s is small with 850,000 residents in 219 Kilometers. Compare that with Paris’ 2.3 million people in 105 square kilometres (in its central area). But as the hub of the Holland Metropole – a region consisting of the Netherlands’ four biggest cities sharing resources and transport infrastructure – Amsterdam reaps the advantages of being an hour or less away from The Hague, Rotterdam and Utrecht. It’s not unlike the way in which the boroughs of London or the arrondissements of Paris are coordinated, Bertens notes.

The Dutch government has played a key role in creating such a business-friendly environment.

“It’s very easy to do business here,” Bertens says. In 2016, 157 foreign companies set up shop in Amsterdam, while Tesla, Netflix and Uber recently opened local headquarters.

Yet some of Amsterdam’s greatest assets have contributed to its rising challenges. The boom in business coupled with its walkable size have squeezed the residential office markets.

Just a few years ago, office vacancy rates exceeded 20 percent; today, it’s saturated and rental costs are climbing, as technology and creative companies clamour to lease space.

“Office vacancy is at such a low rate we potentially cannot accommodate large occupiers, while there is also a large shortage of residential units,” Bertens says. “The city needs to grow. But the municipality has a good strategy in place for the coming years.”

A new metro line connecting the north and the south will help expand the current office and residential markets in Amsterdam-Noord and along the waterfront. Amsterdam also has a history of innovative housing solutions, including self-build homes and low-cost community housing for young people and refugees, with plans to reclaim land to build more homes next year.

“The momentum of Amsterdam as a global capital has happened so quickly,” Bertens says. “It will be very interesting to see how city evolves from local market to a global market but it’s got the right groundwork in place to make a successful transition.”

Click here to read more about investment into global real estate markets in Q3.

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Sven Bertens

Head of Research Advisory, JLL.

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