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Report of the Board of Directors


Improvement of occupiers market continues

Occupier activity in the office market increased for the third  consecutive year in 2017, as the economy is growing, the forecasts are positive, new (re)developments are brought to the market and companies are increasingly aiming to move to locations that satisfy their personnel. Also, secondary sites, such as Zuidoost and Teleport in Amsterdam, which do meet the essential criteria of good accessibility (by both public transport and car) and provide a wide range of amenities (stores, bars, restaurants, etc.), continue their upward path.

The second major trend in the office market is related to the reduction of office stock. Outdated office stock is being converted to other uses and as a result the vacancy in many office markets is dropping. As the more attractive locations have now been converted, more attention is being given to larger-scale redevelopments, like Hoofddorp-Hyde Park. In this location, an entire office park will be converted to residential use, simultaneously creating a healthier demand for the remaining offices in Hoofddorp.

Yield compression is slowing down

Investor demand for offices reached a post GFC record volume of over € 6 billion in 2016 and 2017 is set to top that with close to € 5 billion in transactions by the end of Q3. As a result of this increase, yields continued to compress. This goes primarily for the prime office markets in the Netherlands, but is also spreading to secondary markets and smaller cities, as product in the prime markets is becoming scarce and expensive.

Innovation is essential

Innovation is a key factor in the office market, too. Investors need to adapt to the changing demands of office users and to the increasing possibilities technology is offering. Smart and healthy offices are the talk of the town and this is about offices that can adapt to individual needs and wants of employees (lighting, heating, routing, parking) by doing so create an efficient and pleasant office environment. A number of these improvements also increase the sustainability of the office buildings, a second path with a sharp focus on innovation, which also includes new materials and new ways of looking at mobility.

Additionally, the processes related to the construction, marketing, leasing, maintenance and sale are being improved through the use of new tools, many of them aimed at creating platforms connecting the different actors in these processes. This also leads to increased transparency between these actors, as they need to share data and information.

Positive outlook for the Fund

The Office Fund’s assets are well positioned, as they fit well with the market trends and developments described above. In 2018, the Fund will complete the redevelopment of Building 1931 and Building 1962 in Amsterdam, delivering state-of-the-art office buildings that will be (largely) let upon completion. The construction of Hourglass in Amsterdam’s Zuidas business district will continue throughout 2018, with delivery planned for end-2019. In The Hague, rental activities will focus largely on WTC The Hague. The series of lease transactions seen in 2017 will continue into 2018 and will result in a substantial increase in the occupancy rate for this building. With regards to WTC Rotterdam, the Fund will continue to focus on the ongoing improvements in the quality of the building. The Fund has so far focused on the parts of the investment plan that do not require approval from the Dutch Cultural Heritage Agency. From 2018 onwards, the focus will be on improving the quality of the listed sections of the building, including the main entrance. This will make it much more visible to both tenants and visitors just how WTC Rotterdam is responding to market trends. As it has in the case of WTC The Hague, the more dynamic entrance hall in Rotterdam will help attract new users, which will in turn increase the building’s occupancy rate. This year, the Fund will also make a decision on the transformation of some of the offices in the low-rise section of the building into a hotel. This new function would be an excellent fit with the WTC concept. Finally, the Fund plans to improve and increase the range of services through the addition of a fitness area and (better) food and beverage facilities.

Adding value through active asset management

In addition to acquisitions, the Fund will devote a great deal of attention in 2018 to improving its assets, with a strong focus on the use of technology and improving the sustainability of its office buildings. For instance, the Fund will use an Environmental Management System to step up the collection of data for reporting purposes, to improve the performance of technical installations and to back up new business cases for investments. As part of its effort to improve services to tenants, the Fund is also planning to launch a portal, which will act as a central contact point for clients: a single location for information and for any questions (existing and potential) tenants may have. At the same time, this portal will also act as platform for interaction between tenants and to offer and reserve facilities and services, such as meeting rooms, parking spots or catered lunches. This tool will boost the digitisation of documents and processes and will improve efficiency, effectiveness and client focus via (automated) workflows. In 2018, the Fund is planning to launch new websites for a number of assets, including WTC The Hague and WTC Rotterdam, with a link to a new CRM system and other functionalities that will enable us to generate more and better online leads for new leasing transactions. As a final example of our active asset management approach, the Fund will be working on a number of projects related to mobility and the circular economy.

Amsterdam, 19 March 2018

Bouwinvest Real Estate Investment Management B.V.

Dick van Hal, Chairman of the Board of Directors and Statutory Director
Arno van Geet, Managing Director Finance & Risk
Allard van Spaandonk, Managing Director Dutch Investments
Stephen Tross, Managing Director International Investments

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