In Amsterdam, offices have become considerably more expensive in recent years. In the past four years, realised rents increased by a yearly rate of 10%. Despite this rental growth, the current rent levels of offices in Amsterdam are still substantially lower than those in competitive cities, such as Frankfurt and Dublin. This applies to both realised- as well as prime rents. In Amsterdam, prime rents rise above € 400 per sq m, while rents in these competing cities are approximately € 500 and € 700 per sq m, respectively. It is partly due to this that Amsterdam remains an attractive alternative, for example for companies that want to leave London. This is illustrated in research report ‘City Special Amsterdam – It’s all about rental growth’.
"The (international) attractiveness of Amsterdam is easy to observe", explains Jordy Kleemans, Head of Research & Consultancy at Savills. "Yields have fallen sharply and rents have risen strongly. In addition, vacancy rates have dropped substantially to its current level of around 5%. It is striking that the historically secondary districts of Amsterdam are also performing well. A good example of this is Amsterdam Zuidoost. In under two years, the vacancy rate here dropped from 15% to below 4%.” These low vacancy rates are due to economic growth, high demand and the removal of old office stock coupled with the lack of new build.
“In the current market situation, it’s all about rental growth”, says Clive Pritchard, Head of Country at Savills Netherlands. The sustained (international) demand, in combination with the already existing shortage within the Amsterdam office market, underlies the expectation that the rental ceiling in Amsterdam is far from being reached; this despite the substantial rental growth over the past few years. A further increase is not only expected in secondary districts, but also in prime areas. Due to the high continuing demand and as new office development is virtually impossible in the monumental canal ring, we expect the highest and the most sustainable rental growth in the centre of Amsterdam; rising to over 5% per year."
Amsterdam has been in the scope of international investors for years. The share of foreign investors has been structurally above 70%, with a peak of 83% in 2017. "For years, the Amsterdam office market was considered to be interesting due to the expected yield compression. Nowadays, sustainable rental growth is the main driver to invest in the Amsterdam office market”, according to Pritchard.