Q1 2018

Hoofddorp

A city on the brink of a trend reversal

City Special | Hoofddorp Offices Savills World Research savills.nl/research City Special | Hoofddorp Offices Savills World Research | Q1 2018

HOOFDDORP

BEUKENHORST WEST

BEUKENHORST STATION DE HOEK GRAAN VOOR OOST VISCH ZUID

DE PRESIDENT BEUKENHORST ZUID

Introduction Office Market

the Netherlands: Amsterdam, Rotterdam, The become limited and expensive. However, Hoofddorp is part of Hague and Utrecht. In addition to Schiphol demand for offices decreased sharply as a The office market is ‘De Hoek’, which is located closest to business park to be developed, and as the Airport, the Port of Rotterdam is also an result of the financial crisis. Because of its Schiphol, comprises mostly of logistics most attractive area of ‘Beukenhorst’. Haarlemmermeer, important economic driver. dependency on larger surrounding cities, relatively dominant in properties with very few offices. Many of Hoofddorp consequently fell into decay. the established companies here have a South is home to several multinationals such a municipality that The growth of Hoofddorp has primarily been Vacancy levels increased rapidly and the the local economy of close connection with the airport because Asics, Danone, Walt Disney and Sony, and driven by Schiphol. As the airport developed quality of the buildings and public spaces transportation is a major part of their still offers space for new developments. This includes 21 towns to become the second largest airport in deteriorated. That was the general situation in Hoofddorp. business. part of the ‘Beukenhorst’ also contains Park Europe, Hoofddorp also benefitted. This is most of Hoofddorp until approximately 2015. 20/20. and villages and reflected in the fact that around 10% of the Currently, Hoofddorp has 670,000 sq m of ‘Graan voor Visch’ and ‘De President’, jobs at the airport are held by residents of Since then, the tide has turned as rents have office space which is mainly concentrated on located on the west side of Hoofddorp, are The last area is ‘Beukenhorst East’, which is Schiphol Airport. Hoofddorp. The growth of Amsterdam has been rising, vacancy levels have dropped the business parks of ‘Beukenhorst’ and ‘De mixed office and industrial areas. characterised by large-scale office buildings also had an impact on Hoofddorp. and interest from investors has risen. Now it President’ as well as the industrial estates of which were mostly constructed between 1990 Haarlemmermeer is located close to seems that Hoofddorp is on a brink of a trend ‘De Hoek’ and ‘Graan voor Visch’. All of these The ‘Beukenhorst’ business park is divided and 2000, and it boasts excellent connections Amsterdam and is part of the Randstad, As popularity and demand rose significantly reversal and is becoming an attractive area areas are close to the Hoofddorp’s central into three areas: West, South and East. with the A4 motorway and Hoofddorp’s a metropolitan region in the west of the in Amsterdam during the 1990s, Hoofddorp for occupiers and investors. train station, which is only one train stop ‘Beukenhorst West’ mostly consists of central train station. ‘Beukenhorst’ is a Netherlands. This region is home to more became a major overspill town where large away from Amsterdam South (approximately vacant office buildings, some of which have maturing office location with high potential than 7.1 million people and is therefore one (inter)national companies such as L’Oréal and So, what are the drivers behind this revival 15 minutes) which includes the trainstation of already been converted into residential units. due to the planned redevelopments in of the largest conurbations in Europe. The Walt Disney established themselves because and what can we expect from this area in the Amsterdam’s CBD - the South Axis. ‘Beukenhorst South’ was the last part of the ‘Beukenhorst West’. Randstad includes the four largest cities in the supply of office space in Amsterdam had coming years?

The municipality of Haarlemmermeer is years to drain the lake, after which land was The history of the located in the reclaimed area of what earmarked for several new villages including “What are the drivers behind was previously the largest lake in the ‘Kruisdorp’, the former name of Hoofddorp. Haarlemmermeer Netherlands: the ‘Grote Haarlemmermeer’. In 1970, Hoofddorp only had 9,000 residents this turnaround and what can but over the last 40 years this number has This lake formed a threat because the grown substantially to its 2017 level of we expect from the Hoofdorp and Hoofddorp water eroded the land which protected the 74,300. Hoofddorp has quickly developed surrounding areas against flooding and so into the most important main town within area in the coming years?” work started to drain it in 1840. It took 12 the municipality, and beyond.

1 2 City Special | Hoofddorp Offices Savills World Research | Q1 2018

Park 20|20 GRAPH: STOCK MOVEMENTS OVER THE YEARS Pork cycle is detected STOCK NEW DEVELOPMENTS WITHDRAWALS VACANCY Park 20|20 is the world’s first business park built entirely based on the Cradle- to-Cradle principles, which is highly sustainable. 740.000 30% The park combines innovative building designs with the focus on the well- 720.000 being of its occupiers. The BREAAM 25% certificate plays an important role as it 700.000 forms the basis for how the buildings are being developed. It also enables 680.000 developers to measure their level of 20%

sustainability. Park 20|20 is a mixed- 660.000 use park, which is home to offices, a

hotel and food & beverage outlets. The 640.000 15% public space offers lots of greenery and

water. Park 20|20 is very attractive and 620.000 generates substantial spin-off for the other office locations in the vicinity. 10% 600.000

580.000 5%

560.000

540.000 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Stock & vacancy Take up

occupiers retreat as soon as they can. The graph the graph on the next High ratio of Distribution & Retail oriented take up in 2017 As demand increases, so does supply. page illustrates this phenomenon, new developments continued to be After years of standstill brought to the market in Hoofddorp while the vacancy levels continued In response to the growth of Amsterdam and Schiphol, Hoofddorp to rise. on the occupiers’ market continuously expanded its office stock due to its role as an overspill town however stagnating demand has caused the vacancy level to rise After years of very high vacancy levels, a decrease in these levels 83% - BUSINESS SERVICES above 25% since 2010. has been noted in recent years. One of the reasons for this is the in Hoofddorp, the city is large-scale transformations of office stock which is planned for the 6% - DISTRIBUTION & RETAIL The development of the stock is typical for an overspill town and coming years, such as the ‘Hyde Park Project’ by Snippe. This project gaining popularity amongst relates to the cyclical nature of the “pork cycle”. As demand increases, aims to withdraw approximately 100,000 sq m of office stock from 4% - INSURANCE & FINANCIAL so does supply. However, the expansion of supply is a slow process ‘Beukenhorst West’ (around 15% of the current total office stock in occupiers. because the development of real estate takes several years. As Hoofddorp) and redevelop it to approximately 3,000 to 4,000 residential 5% - PUBLIC SERVICES, demand changes during the development process, real estate is not units. This results in a current vacancy level of around 12%. We expect Consequently, take up has shown stable growth to just below EDUCATION & HEALTH absorbed as fast, especially in overspill towns where investors and the office stock will decrease even further as withdrawals continue. 50,000 sq m in 2017, compared to 3,600 sq m in 2010. The 2% - TMT (TECHNOLOGY, office market has shown exponential growth, with a peak in MEDIA & TELECOMMUNICATION) 2012 when Fluor absorbed 21,100 sq m - the second largest new lease transaction in the whole of the Dutch office market in 2012.

The stable growth was confirmed once again in 2017, with significant leases for the likes of Asics, leasing 11,100 sq m for its EMEA head office, and Danone leasing 8,350 sq GRAPH: INCREASE IN OFFICE TAKE UP OVER THE LAST FEW YEARS m for its head office, both at Taurusavenue. These types of innovative companies would probably not have established 60,000 themselves here a few years ago because they would have preferred cities such as Amsterdam however Hoofddorp’s 50,000 increasingly attractive international business climate and its vicinity to Amsterdam have attracted these companies, 40,000 “The transformation of offices to especially to Beukenhorst South.

30,000 residential gives both the office and It is worth noting that the majority of take up in 2017 AVERAGE consisted of businesses related to the distribution and residential market a qualitative and retail sectors. This is due to the strategic location close to 20,000 Schiphol Airport, which forms a hub with easy international quantitative impulse” access and good distribution connections. 10,000

0 Jordy Kleemans 2010 2011 2012 2013 2014 2015 2016 2017 2018

3 4 City Special | Hoofddorp Offices Savills World Research | Q1 2018

including Hoofddorp, Teleport/Sloterdijk and Amsterdam-Zuidoost. Office locations Best practices to of this type shared certain characteristics “If Hoofddorp continues which left them vulnerable: they lacked a counter market mix of functions, had less attractive public this upward trend, it will spaces and their occupants consisted fluctuations mainly of large traditional companies. become a part of the These characteristics, in combination with Amsterdam agglomeration” a worsening economic climate, left these The real estate market is particularly locations empty and abandoned.This gives susceptible to cyclical economic rise to a crucial question: are all secondary fluctuations (often referred to as the ‘pork office locations destined to suffer this fate Mans Vroom cycle’), with demand from occupiers and in times of recession? investors plummeting when recession hits. However, some real estate sectors are more Thanks to the interventions made by susceptible than others. governments and market players in recent years, the answer is a resounding ‘no’. Competition is especially tough for Even the very best practices cannot halt the secondary office locations. This is where workings of the business cycle, but what a downturn in demand first becomes they can do is alleviate the negative effect apparent, and the decline is far more as much as possible. Amsterdam Teleport/ marked than in prime locations. This sector Sloterdijk is a shining example: as the is hardest hit because new developments location underwent a transformation into in secondary locations occur later in the a mixed-use location, it began to attract cycle and tend to reach completion when innovative companies, vacancy decreased the cycle is already past its peak, resulting and rents started to rise. Hoofddorp, a in a lack of take up and an increase in comparable location, has yet to reach that vacancy. In the past few years, this effect level. However, with all the right ingredients has been seen across secondary office in place, it is on the brink of the same locations in and around Amsterdam, positive transformation.

Rents The Savills Outlook

recent years, rents have once again been Beukenhorst South continued to achieve rents To return to the question we asked at the large-scale conversion of office stock into by creating a mixed-use environment and In 2008, gross prime rising: they are currently on a par with 2008 of over € 200, significantly outperforming other outset: what are the drivers behind this residential units, it has facilitated the creation converting office stock to reduce vacancy. and are expected to remain stable or show a office locations by offering improvements turnaround and what can we expect from this of a mixed-use location, a big step in the right Savills expects this positive trend to continue rent in Hoofddorp slight increase as vacancy continues to drop. in the quality of both assets and their area in the coming years? direction in terms of significantly reducing as Hoofddorp provides opportunities for Rents of € 220 are mainly being achieved in surroundings. In hindsight, it is clear that vacancy. This strategy builds on past further development. As a substantial stood at € 220 per new developments, while rents for existing this development prompted a break with the The answer is clear: Hoofddorp is currently initiatives, not least the new infrastructure proportion of the office stock is withdrawn, assets are in the region of € 185 to € 200. negative market trend, paving the way for developing strong fundamentals which which boosted Hoofddorp’s accessibility, and the remaining locations will absorb the These rises buck the current trend, with rents to rise again. Beukenhorst South is now will bring sustainable growth in the future. the ongoing spin-off of Beukenhorst South. continuing demand for office space. This will sq m per annum. quality improvements creating a stable base a beacon for the region, exerting a positive New developments in this area will further Hoofddorp is creating a firm foundation that prompt a further decrease in vacancy, along for future rental growth. influence on adjacent office locations. strengthen Hoofddorp’s position as an can weather the slumps in the economic with quality improvements to existing stock. internationally oriented office park close cycle, achieving a level of resilience already New investment opportunities are also on the However, the combination of high vacancy Developments in Beukenhorst South provide The fact that Asics and Danone have decided to Schiphol Airport and Amsterdam. The found in Amsterdam Teleport/Sloterdijk and cards for Beukenhorst East and Beukenhorst and a drop in demand had a significant a particularly striking example of market to locate their European headquarters in municipality of Haarlemmermeer has seized Amsterdam-Zuidoost. South, as their competitive position is impact, especially between 2011 and 2015. opportunities. In the period 2011-2015, when the area provides ample confirmation of its momentum by giving market players sufficient enhanced by the refurbishment of existing As a result, gross rents took a tumble. In rents in general were declining, premises in success. freedom to enhance Hoofddorp’s appeal Rising rents and contracting yields have stock and new developments in and around as a stable office location. By allowing the been achieved in all these office locations Park 20/20.

Investments Yields

Since 2013, the office market has held Amsterdam (leasehold). As a result of increasing interest, yields growing appeal for investors as they As a result of this burgeoning interest, in Hoofddorp have been contracting over picked up on the quality improvements investment volume expanded from € 66.5 the past few years. Currently, prime gross in supply. As occupiers are drawn to the million in 2013 to over € 313 million in yields range between 5% and 6%, as office locations in the region and rents 2017 (+371%). The situation took a turn opposed to 8% in 2012. have started to rise, interest has widened for the worse in 2015, when only four to include not only speculative developers relatively modest transactions took place. This compression indicates that investors and investors, but also institutional and now perceive less risk in the office market foreign investors. In 2017, however, investment volume in Hoofddorp compared with a couple of almost doubled compared to 2016 as a years ago. In 2017, international investment result of major transactions such as 90 accounted for approximately 73% North purchasing headquarters for both of volume. A benefit of investing in Danone and Asics at Taurusavenue for Hoofddorp, instead of Amsterdam, is the € 90 million, and Corum purchasing the land ownership. In Hoofddorp freehold head office for FedEx Netherlands at properties are common in contradiction to Taurusavenue 111 for € 47.6 million.

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Stock and vacancy The vacancy rate has been dramatically reduced by the ongoing conversion of a significant proportion of the stock and the demolition of other properties to allow construction of between 3,000 and 4,000 residential units as part of the Hyde Park Project. Vacancy reached a high of over 25% in the past but has now been brought down to 12%. This positive trend will continue as withdrawals and conversions continue to occur.

Take up The last couple of years have seen steady growth in take up, from 3,600 sq m in 2010 to approximately 50,000 sq m in 2017. Hoofddorp is becoming increasingly popular with occupiers. Savills expects to see a rise in take up as redevelopment accelerates Hoofddorp’s transformation into a vibrant office location with an international business climate.

Rents Since the economic crisis, when demand all but dried up in Hoofddorp, the town has been gaining in popularity among occupiers, especially in the last couple of years. As a result, rents are on the rise again. Prime gross rents currently stand at € 220 for new development and € 185 to € 200 for existing assets. Savills expects these rents to remain stable or to increase slightly.

Investments With occupiers being drawn to Hoofddorp and rents on the increase, investors are once again taking an interest in Hoofddorp. Investment volume doubled in 2017 compared to 2016 and currently stands at € 313 million. Savills is forecasting a continued rise in investment volume.

Yields Yields have been contracting over the last few years. Gross prime yields currently range between 5% and 6%, and are likely to contract even further as the appetite among investors continues to grow. Secondary yields stand at 8%.

Effect on the business cycle Hoofddorp has all the ingredients to reinvent itself as a stable key office location in the immediate vicinity of Schiphol and Amsterdam. By strengthening the fundamentals, it can ride out unwelcome fluctuations in the business cycle and offer a solid destination for investor capital. By taking this route, Hoofddorp has launched itself on the same upward trajectory that revitalized findings Amsterdam Teleport/Sloterdijk only a few years ago.

Want to know more? Meet our team at Savills call us at +31 (0) 20 301 2000 Property starts with people.

Mans Vroom IJsbrand Brunger Jordy Diepeveen Jordy Kleemans Associate Director Associate Associate Director Head of Research & Savills Agency Savills Agency Savills Investments Consultancy [email protected] [email protected] [email protected] [email protected]

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