The future of real estate

We are optimistic about the future of real estate. We do not believe in the depiction that is sometimes made of a future in which real estate will become largely superfluous. Nor do we believe that high-potential investments are only possible in the Randstad metropolitan area. There will always be demand for real estate wherever people live, work, recreate or require healthcare. But what will change for investors in real estate will be the accommodation needs of users and the method of assigning value to real estate space.
Rabobank foresees the following developments in the real estate market over the next five to ten years:

The digitalisation of real estate

While this development offers myriad opportunities for real estate investors, it can also be extremely threatening. We explain this in greater detail in the long-read Bricks and bytes blend.

Bricks and bytes blend

The real estate market is increasingly demand-driven

It has not been about only square metres for a long time now. The focus today is on lessees' needs with respect to premises and facilities. Putting future real estate users in focus: how will generations X, Y and Z live and work? What are their drivers? Buildings and accommodation are two separate things. The building is the collection of physical characteristics, while accommodation is a service that must meet customers’ needs.

Use via lease or other contracts is becoming more flexible

This makes it more difficult to predict the certainty of cash flows. Buildings and accommodation are becoming increasingly further removed from each other as a result. This poses a challenge for investors and financiers: how can we link long-term investments to increasingly shorter-term collateral? And what can be seen as collateral? A complete building or perhaps only a reusable facade? Rabobank responds to this challenge in part by giving an entrepreneur’s skill and the operation of the real estate greater weight in financing decisions. We are also doing this by researching how we can imbed circularity into the value of real estate.

The use of real estate is decreasing

This will apply the most to offices, retail spaces and some forms of social real estate. Take offices for example. While more than three million square metres have been transformed or demolished over the last six years, this has not yet led to a genuinely substantial decrease in the supply. The inventory is decreasing, but so is the use. We see this trend in retail real estate as well. Careful considerations must consequently be made when planning new construction. We expect that the social and technological changes will give rise to a new shortage of space. The discussion on the existence or threat of high vacancy rates often focuses on how the problems arose and less on the solution. We have demonstrated through the New High Street project that successes can absolutely be achieved at the local level.Supra-regional alignment and collaboration can strengthen this effect.

High value of social real estate increases social cohesion

The problems surrounding high vacancy rates reveal the high social value of real estate. We particularly see this outside the large cities.

Real estate entrepreneurs in these areas operate in the foreground and incorporate knowledge of real estate and the local community into new ideas and concepts. They are given this scope because international investors concentrate on mainly prime locations in large urban areas. An example of this is the Corneliusflat (Cornelius apartment building, photo) in Roosendaal, the Netherlands. It is a former office building that has been transformed into apartments and assisted-living apartments.

Circular solutions to become a permanent part of the real estate process

This will occur if for no other reason than because the mismatch between needs in sectors necessitates transformation. Recycling and reuse of materials and assessing their value will become standard practice in relation to the new construction process and real estate valuation. An excellent example of recycling is Rabobank's office building in Eindhoven. It was possible to reuse 95% of the materials from the old building in the new building through a combination of demolition and new construction. Another example is the newly built office building of grid operator Liander in Arnhem, the Netherlands.

The energy transition is prompting a high level of investment in sustainability

Sustainable buildings are quickly becoming the new norm in the market. But many buildings in the Netherlands do not yet meet this criterion. The sustainability bar is being raised higher and higher, not only due to user demands, but also due to related legislation and regulations. Real estate owners will consequently have to focus fully on making their portfolios energy efficient. Real estate that is not made sufficiently sustainable will be in danger of becoming unmarketable in the reasonably short term as it will be very difficult to sell or lease.

The housing market will recover quickly

The housing market is picking up thanks to the increasing economic growth. There will, however, be large regional differences. Domestic investments will rise due to the recovering market and this will increase opportunities for Dutch enterprises. Consumers will gain greater confidence and the recovering demand will once again lead to an increase in the need for new construction.

Read 'The Netherlands between technology and deglobalisation'

Real estate in the Netherlands will continue to attract international investors

The market shows that, in addition to problems, numerous solutions are also possible through new business models, such as flex offices or leisure concepts, transformation of buildings and energy-neutral buildings and districts. The market will adapt to changing demand and external factors. So there will always be a basic need for real estate, even if the conditions are challenging. And because the market will be able to adapt time after time, many buildings in large parts of the Netherlands will remain stable in value, particularly those buildings that feature the right combination of location, building and services to users. The growing international availability of investment capital for Dutch real estate will lead to a strong improvement in the liquidity of prime assets.