Last year was an exciting year for the Office Fund, as we saw our strategy paying off and made our first acquisition of a new-to-build office building in many years. We have stepped up the optimisation of our portfolio over the past three years, and in 2015 disposed of a lot of office buildings we no longer considered core. Since then we have focused our efforts on acquiring and redeveloping what we believe is the future of the office sector – multi-tenant and multi-use buildings in locations that include other facilities and offer excellent transport links.
Our acquisition of the Hourglass building in Amsterdam’s Zuidas business district, which combines offices and a hotel, is a perfect example of this strategy and it will be an outstanding addition to the Office Fund portfolio - and the Hotel Fund - when it is completed in 2020. And that ability to divide this asset across our funds put us in a very competitive position, as most investors are looking to acquire an office or a hotel, but seldom both together. But what I find most pleasing is that this was a real joint effort, involving a lot of hard work from people right across the organisation. The Hourglass acquisition is also a testament to our confidence in the Dutch office market, especially in multi-functional and multi-tenant assets in prime locations.
While all our office assets were already in the top four cities – Amsterdam, Rotterdam, Utrecht and The Hague – the acquisition of Hourglass will give us a much better spread and reduce our overweight position in The Hague. Not to mention that fact we will have a prime asset one of the country’s fastest growing and most popular business districts. We have already signed a lease for 15,000 m2 in the Hourglass with leading Dutch law firm Loyens & Loeff. We are seeing signs of clear recovery at prime locations. The fact that we added a third investor to the Office Fund shows that others share our faith in this market.
Of course, last year we also continued to optimise and upgrade our portfolio of office properties. We completed the renovation of the plaza section of WTC The Hague and saw an immediate uptick in new leases. We continued the renovations in WTC Rotterdam, initiated a number of projects and assessed plans to improve the WTC-concept. The Fund also kicked off the exciting redevelopment of the former Citroën buildings in Amsterdam, now called The Olympic 1931 and The Olympic 1962, with delivery currently scheduled for the first quarter of 2018. We have already signed leases with the first two tenants for this asset.
Despite the fact that last year was something of a transition year and the fact that a large part of the portfolio is still under construction or in redevelopment, we still recorded a solid return of 6% in 2016 and I am confident we will be able to meet our long-term goal of average annual returns of 7%. While our occupancy is still low at around 80%, again due to the fact that we have a lot of properties being redeveloped, we expect this to increase to at least 90% in the years ahead. The continued economic recovery and upsurge in business confidence will continue to increase demand for office space in the right locations. Office complexes able to meet the flexibility demands of the New World of Work concept are proving very popular. And that is exactly what we have been focusing on for the last few years.
Of course, tenants are becoming ever more demanding on the sustainability front and we have invested a great deal and will continue to invest in making our office assets as sustainable and environment-friendly as possible. And it is paying off, as we saw last year in our Nieuwe Vaart office complex in Utrecht. We teamed up with our non-profit tenants to draw up plans for a truly sustainable building in line with their very strict environmental standards. And they in turn helped us to recruit like-minded organisations as tenants, as a result of which Nieuwe Vaart was practically fully let by the end of last year. This once again proves that actively working with our tenants, as well as other players such as local councils and sector organisations, is the way forward in the office sector and the best way to create a truly sustainable portfolio.
All that is left is for me to express my gratitude to our investors for their continued trust and all our employees for their dedication and commitment to Bouwinvest.
Dick van Hal
Chairman of the Board of Directors