Real estate developers continue to realise transformations

July 2022

Bas Gregoor of Grehamer & Company and Jeroen Belt of OIMIO on the latest developments in the market for transformations

"The whole of the Netherlands zoning-free. That would be a nice solution to loosen up a lot of transformation projects," says Bas Gregoor of Grehamer & Company. Jeroen Belt of OIMIO and Bas Gregoor recently spoke to each other about the latest developments in the market for transformations. These are dynamic times in which many external factors have an impact on the development or reallocation of real estate. Shortage of people, land, materials, increased regulatory pressure, high inflation, rapidly rising interest rates and a nitrogen crisis, to name a few.

How are transformation projects feasible in these times? "Not so long ago, transformations were still a special part of property development and investment market in the Netherlands," says Bas Gregoor. Bas started in the depths of the crisis, in 2013, with CitySide Apartments, buying up hopeless office buildings in the not-so-sexy cities and transforming these into attractive rental flats. At the time, this was still a niche market.  "This playing field became busier fairly quickly when, after the credit crisis, the Crisis- en herstelwet (Crisis and Recovery Act) came into force." This brought forward planned construction projects, for example, through shorter procedures. "At the time, there were many vacant offices and many offices that were easy to transform - low-hanging fruit, in other words. In the meantime, much has changed and we see that more needs to be done to transform a building to meet, for example, sustainability requirements or local and regional regulations."

Tension

When asked what the current state of affairs is, Jeroen Belt says: "The situation is currently tense. On the one hand, there is an enormous demand for good and affordable housing. This pressure is also increasing in smaller towns and villages. On the other hand, there are also specific wishes from consumers and governments, such as mixing functions in areas, inner-city living or near a public transport hub. But meeting this demand is not made easier by everything that is happening around us." Bas adds: "Projects are being looked at more creatively and in some municipalities there is room to realise high-rise buildings, but unfortunately with long timelines. Within the existing contours of a building, the Crisis- en herstelwet (Crisis and Recovery Act) allows us to move quickly. But if we need to deviate from this, the procedures will take a lot longer. All-in-all, projects and cooperation with the authorities are becoming increasingly complex. At the moment, we can see that many real estate developments are stagnating or even at a standstill."

Opportunities

Looking ahead, we therefore see challenges and tension in the market. But in the midst of this turbulence, new opportunities are also presenting themselves. From January 2023, the new Environment Act (Omgevingswet) will come into force. This should make the process of transformation a lot easier and quicker, and could improve one of the aspects where things currently falter. For some projects, this could make a lot of difference. On the other hand, the obligation of energy label C will also come into force. This is not yet the case for many of the buildings, and could therefore be a driver for looking at what can be done with such offices. Transformation could be the best option in some cases.

Source: Vastgoedjournaal