Amsterdam Amsterdam Zuidoost Experienced a Fall in Vacancy of 85% Over an 2% Zuidoost Eight-Year Period
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Q4 2018 Amsterdam It’s all about rental growth City Special | Amsterdam Savills World Research savills.nl/research City Special | Amsterdam Introduction Amsterdam two years after the announcement of Brexit The world is internationalising and Amsterdam is no exception. In spite of its relatively modest size, Amsterdam has proven its ability to compete at the global level. Two years ago, Amsterdam was seen as one of the obvious choices for the companies that would leave London due to Brexit. However, to date, an avalanche of relocations as response to Brexit did not occur, with the European Medicines Agency being the most notable exception. But Amsterdam has not stood still. Its office market is performing well and Amsterdam is growing vigorously in every respect. What is behind this growth? Which policies are being pursued? What might Amsterdam’s future hold in the light of ongoing internationalisation? And what does this mean for investors in Amsterdam’s office market? AMSTERDAM RANKINGS 1st place OECD Better life index 1st place EIU Safe cities index (6th World) 4th place Dynamic cities 5th place Tech cities st 1 place Spotahome Healthiest Cities 1 Savills World Research | Q4 2018 AMSTERDAM’S BROAD-BASED GROWTH Hotel Rooms 2007 2017 2022 19,400 32,602 > 40,000 2017 2030 Dwellings 2007 (+45,000) (+120,000) 383,078 428,038 550,000 2017 2017 2017 2017 2017 Real GDP NL EU DE UK FR Growth 2.9% 2.4% 2.2% 1.7% 2.2% Demographics AMSTERDAM’S FORECAST POPULATION GROWTH IS ALMOST Amsterdam’s pulling power FOUR TIMES ABOVE THE NATIONAL AVERAGE Amsterdam is located within the metropolitan region of the Randstad. This region is home to 7.1 million people, making it one Population Amsterdam 2018 854,074 of the largest conurbations in Europe. In addition to the four largest cities in the Netherlands, the Randstad also includes Schiphol +23.3% 2040 Airport, Rotterdam-The Hague Airport, and the Ports of Rotterdam 1,053,234 and Amsterdam. All this makes the Randstad the economic engine of the Netherlands. Population Netherlands 2018 17,200,000 Amsterdam is the capital of the Netherlands and by far its largest city. Its population exceeds that of Rotterdam, the second +6.0% 2040 18,200,000 largest city in the Netherlands, by over a third. Notably, however, Amsterdam has been larger in the past. As a result of a century of rapid urbanisation, Amsterdam’s population peaked at 872,000 in 1959. This number declined over the decades that followed, before rising again to 854,047 in 2018. With expected average growth of 10,000 people per year, Amsterdam will set a new national Households Amsterdam 2018 457,300 population record by becoming the first city with over a million +19.1% inhabitants by 2034. 2040 544,600 This growth is almost entirely due to immigration from other countries (including expats) and young Dutch people migrating to the city. At the same time, young families are increasingly opting to Households Netherlands 2018 7,810,600 leave the city and moving to neighbouring municipalities. The new +9.2% Amsterdammers who are taking their place are often young (17-27 2040 8,531,600 years) and come to the city to study and work. But what makes Amsterdam so attractive? GROWTH IN AMSTERDAM IS DRIVEN BY A BIRTH EXCESS AND FOREIGN MIGRATION -5,716 +35,328 +33,294 Migration balance (domestic) Migration balance (foreign) Birth Surplus 0 2 City Special | Amsterdam GRAPH: AMSTERDAM HAS SUBSTANTIALLY HIGHER GROWTH IN COMPANIES AND JOBS THAN THE NATIONAL AVERAGE 40% + 40,150 +37,5% 30% 20% Growth of Companies + 238,580 2012 - 2017 +18,1% 10% 0% Amsterdam The Netherlands 40% 30% Growth of Jobs 20% 2012 - 2017 + 94,100 +17,3% +2,1% 10% + 174,200 0% Amsterdam The Netherlands Economy Greater Amsterdam, placing it among the highest in Europe and In terms of growth, alongside cities such as London and Stockholm. Amsterdam is also important to the national economy: its share in the total Dutch GDP is Amsterdam is among 14%. Europe’s best performers Amsterdam’s growth rests on positive development in all sectors, which is unique for the Netherlands. Sectors that have shrunk in other places, such as the financial sector, continue to grow in Amsterdam. International companies that locate in Amsterdam benefit from a However, the real engines of Amsterdam’s economy are specialist fine-meshed infrastructure with relatively short travel distances. business services such as lawyers, consultants and job placement Schiphol Airport, for instance, enables employees to reach other services; these sectors have traditionally been strong, partly due to the financial centres such as London and Paris within an hour. The city’s tax-friendly regime. fine-meshed infrastructure is a huge asset to the city. The recently completed North-South metro line, in which a total of €3.1 billion has Finally, there is the strong growth of IT. ‘FinTechs’ and banking been invested, means that Schiphol can now be reached in under sector back offices account for a large part of this. The medical/ 15 minutes. Other pull factors include a highly educated workforce pharmaceutical sector is also strongly represented. All these sectors (47% university-level educated, versus 30% nationwide) with the best are contributing strongly to above-average employment growth in non-native English proficiency (EF English Proficiency Index), and an Amsterdam. attractive and safe living environment. All these factors contribute to Amsterdam’s strong performance in innovative areas such as In view of the factors described above, it is hardly surprising that technology. After Austin, San Francisco, New York and London, Amsterdam has emerged as a logical alternative to London. But how Amsterdam ranks fifth in the Savills Tech Cities Ranking, ahead of has this worked out over the last two years? cities including Boston, Singapore and Tokyo. Partly because of this, Amsterdam manages to attract international multinationals and act as a hotspot for startups. For the tertiary “Amsterdam puts quality first sector, in addition to Amsterdam’s excellent connectivity, the relative affordability of space adds to the city’s appeal. The Savills Live/Work when attracting (international) Index shows that Amsterdam remains relatively affordable compared to other cities in the world, despite an overall increase in the cost of living companies, which has led to and working of no less than 29.6% over the past year. shortages on the office market.” Amsterdam’s strong pulling power ensures that it also has a strong economy. In the past four years, figures from the Statistics Netherlands indicate an average annual growth rate of 4.2% for the COROP area of Erik Beekman 3 Savills World Research | Q4 2018 Municipal policy focuses on a qualitatively strong business environment The effects of Brexit have been widely discussed, but the expected large-scale relocation of companies from London to Amsterdam has not been forthcoming. As Brexit approaches, however, this seems to be changing, with relocations recently announced by Mitshubishi, Panasonic, Cboe and Ferrovial. The effects of the relocation of the European Medicines Agency to Amsterdam are also becoming visible; one year prior to the actual arrival date, the move has already generated 1,200 additional jobs in pharma- newcomers in Amsterdam (Parool, 2018). The number of companies relocating to Amsterdam might have been higher, were it not for the restrictive office development policy of the municipality. This policy was developed in response to the state of Amsterdam’s office market in 2010, when office vacancy in the city was 17.2%. In 2011, this resulted in the introduction of a ban on office construction and a focus on office conversions. The rapidly declining vacancy rate of the following years led to the ban on new construction being lifted in 2017. In order to create room for (international) companies, the city will now issue two tenders for office construction per year. However, this number will never meet the (expected) demand. The municipality’s strategy involves competing on quality, not price. This moderate growth policy may have deterred some companies, but this does not seem to have been entirely the case so far. In 2017, for instance, 140 companies, particularly in the financial sector, opted for Amsterdam. This was in line with the municipal objectives (FD, 2018). In order to facilitate growth in the long term, there are plans for a new location in the Zuidas-Hoofddorp-Schiphol corridor (Enter [NL]). An area would be created here that combines high-quality offices, houses and facilities. Such an area could provide extra capacity of 300,000 to 1,500,000 sq m of office space in the long term. Noord Zuid metro line 4 City Special | Amsterdam GRAPH: THE GAP BETWEEN SUPPLY AND DEMAND HAS CLOSED IN RECENT YEARS 7,000,000 25% 6,500,000 20% 6,000,000 5,500,000 15% 5,000,000 10% 4,500,000 4,000,000 5% 3,500,000 3,000,000 0% ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘20 ‘23 FORECAST STOCK (SQ M) IN USE (SQ M) VACANCY (%) Stock & Supply municipality-wide commitment to mixed usage in previously mono- Amsterdam is approaching functional areas. Historically, this mixed usage approach has been historically low vacancy occurring in Amsterdam’s city centre for many decades. This quality boost has been motivated by changes in demand, with Amsterdam’s office stock has evolved considerably in 20 years. As a office occupiers being particularly drawn by lively and pleasant result of a great deal of speculation and two crises, the office stock home-working environments that are easily accessible by both public increased by almost one third (1.57 million sq m) over a ten-year transport and car.