Cities in the Netherlands are becoming more popular as the process of urbanisation continues to have a profound effect on the real estate market. Spurred on the desire to occupy multifunctional and readily accessible office locations, companies are exerting pressure on office markets in major Dutch cities. At CBD locations in particular, this results in higher rents, lower vacancy and scarcity of suitable office space.
Substantial rail investments in the offing
Recent renovations and complete overhauls of railway stations such as Rotterdam Central and Utrecht Central have accommodated this movement and significantly boosted the attractiveness of these station districts. In years to come, NS – the Netherlands’ national railway operator – will continue on the same track, investing over 1 billion euros in its stations. On top of this, rail infrastructure manager ProRail is planning to invest 3.5 billion euros in refurbishing existing stations and establishing new stations, together with municipalities and provinces. While most certainly positive, these initiatives also pose new challenges in terms of scarcity of land and the development of office premises.
Being creative above the rails pays off
Recent plans and initiatives have embraced a creative solution to scarcity of land: building above train tracks. Space above the tracks is currently under-utilised, despite offering the most sought-after locations for offices. More efficient use of this space can unlock existing potential and opens the door to new office developments. Exploratory talks with municipalities have shown that many major Dutch cities are ready to support initiatives of this kind, with Utrecht, The Hague and Amsterdam as frontrunners.
Nearby stations increase the value of office buildings
As the figure below shows, the proximity of railway stations positively impacts the capital value of office buildings. Adding office stock above and around railway tracks therefore has enormous potential. The MSCI’s customised office benchmark, which only includes offices near Intercity railway stations, outperforms the overall office benchmark by 60 basis points on total return over 2018.