Value decrease of commercial properties equals to decline in investments
The commercial property value dropped by up to 30% at the end of last year, and the volume of property investment fell by 44%, raising concerns among private landlords and investors. This could be due to various factors such as the global economy, increased borrowing rates, and Dutch legislation, which are impacting the previously overheated property market. Furthermore, new tax measures and upcoming rent price protection increases may make some property investments unprofitable.
The value of commercial property transactions in the last quarter of 2022 was €4.2 billion, which represents a 44% decrease from the previous year and is the lowest investment volume since 2014, according to CBRE. Additionally, NVM reported a 6% year-on-year decline in house prices by the last quarter of 2022.
According to Frank Verwoerd, the recent change in commercial property prices can be seen as a quick correction of price increases seen in recent years. The change in interest rates for financing, which rose significantly in the past nine months, has had a significant impact on pricing in the investment market. The uncertainty about the value of commercial property in the last financial quarter led to hesitancy among investors, resulting in lower investment volumes than in previous years. The return to a more normalized interest rate environment is expected to contribute to a more stable market.
Commercial property prices have experienced an unprecedented and rapid decline, with valuations for offices, logistics premises, and rental properties falling by an average of 15% (and sometimes 25%) in just three months, according to a Cushman & Wakefield valuations expert. The market is described as “imploding,” and the decline is seen as “disastrous” by some experts. The drop in commercial property values is attributed to the recent spiraling of values in the Dutch housing market, which is caused by low interest rates and virtually-free loans.