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The office real estate market is slowly recovering and take-up is rising

Jan Verhaegh • 01/04/2021
The latest figures show that the occupancy of office space by tenants and buyers (for own use) in the first quarter of 2021 amounted to 195,000 m² (+ 28%).

A strong start to the office real estate market because the total occupation is 43,000 m2 higher than in the fourth quarter of 2020, traditionally a quarter in which most transactions take place. The consultant also notes a more positive sentiment among office users regarding housing decisions.

The damping of the commissioning in the fourth quarter of 2020 was caused by pessimism about an impending second wave of corona infections and the subsequent strong lockdown measures. The first quarter of 2021 was marked by the most severe restrictive measures following the COVID-19 pandemic, nevertheless office occupancy increased by 28% compared to the last quarter of last year. The increase is explained by the advisers as the manifestation of deferred housing decisions in the first phase of the pandemic.

Postponement but no cancellation

In the first phase of the pandemic, there was little enthusiasm among office users for starting a housing project in times of strict, restrictive measures in combination with the persistently limited supply of high-quality real estate. In the first quarter of this year, the consultants see a turnaround towards more transaction dynamics, which confirms that the latent search demand among office users is still there. The lead in the dynamics is mainly taken by organizations that suffer no or less direct economic damage from the pandemic. For example, signed for the largest office transaction of this quarter with a commissioning of 14,500m² on the southern banks of the IJ in Amsterdam. Although the meal delivery platform was looking for new accommodation to facilitate expansion well before the virus outbreak, this transaction symbolizes the resilience of the office market.

Characteristic of the resilience of the office market is the relatively large share of Tech and ICT companies that accounted for a fifth of the total take-up volume in the first quarter of 2021, despite the fact that it is in these sectors in particular that it is relatively easy to work from home. In addition to the transaction by in Amsterdam, new accommodation was found outside the Randstad by, among others, the ABB Bouwgroep in Sliedrecht (6,700 m²), Vitens water company in Arnhem (4,300 m²), platform for online training GoodHabitz in Eindhoven (4,000 m²). and for Enexis in Groningen (3,000 m²). The Tech and ICT sector, at 18%, was not the segment with the largest share of take-up. Government and non-profit organizations accounted for 29% of the total take-up, followed by the business services (28%) and industrial and utilities (18%) sectors.

Real estate advisor Cushman & Wakefield emphasizes that these latest figures confirm that the office remains indispensable for organizations in the post-COVID era. The function of the office is shifting more towards meeting, collaborating, acquiring knowledge and sharing knowledge, but also sees the positioning of the organization in the labor market as a distinctive aspect.

Government and SMEs move more than corporates

About 40% of the transaction dynamics in the first quarter of 2021 took place in the 5 largest cities (G5) in the Netherlands. This means that the downward trend has continued since last year, as in 2020 44% of all commissioning took place in the five largest cities with a 10-year average invariably above 50%. This is a consequence of the continuing shortages in the office markets of Amsterdam, The Hague and Utrecht, but also with the shift in user dynamics to small and medium-sized enterprises (SMEs) and organizations affiliated to the government.

Pre-corona, the dynamics in the office market were dominated by large corporates with a traditional focus on the G5, the companies that have hardly started relocation projects since the pandemic. This is in contrast to SMEs, the government and non-profit organizations. These parties are more active than the large corporates, but in other places. For their housing, they are primarily looking for locations in the area where the people who work for them also live or in the area they serve. As a result, housing preferences in these sectors are less focused on the Randstad and - due to the higher transaction dynamics in these sectors - the region's share in the use of offices is increasing. The latter is currently slowing down the geographic polarization in the office market of recent years.

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