REPORT OF THE EXECUTIVE BOARD
to depress market sentiment. Consequently, the rise
in the level of rents has remained below projected
levels in most areas. In the opinion of the FGH
Board, current government policy regarding business
locations is only going to exacerbate the situation.
The fact that large amounts of office space are
situated in what the government considers to be the
wrong locations could undermine the value of real
estate at such sites in the longer term. The degree of
oversupply currendy hanging over the market is
such that even with continued growth in the level
of purchases and lettings, the bloated supply position
is unlikely to improve in the short term. The
chance of a further shake-out in the industry cannot
therefore be ruled out.
In contrast, current conditions in the retail
sector are dominated by the general scarcity of
good property. Local authorities are restricting the
amount of new development at a time when the
large retail chains are wishing to expand. The
prospects for existing shopping malls close to major
urban centers are therefore extremely good, while
the outlook for smaller shopping precincts are more
mixed. To be successful, shopping malls must cater
for the latest consumer requirements, which implies
regular renovation programs. The demand for retail
premises at central locations remains extremely
buoyant. Owners generally have no difficulty in
letting shops at such sites for high rents. As a result
of the shortage of prime sites, more attention is
being focused on accommodation at alternative
locations close to the best sites, which although of
slightly less quality, can still be considered to have a
reasonably high standing. Rents for retail space at
these locations have recently risen considerably.
Moreover, projected rises in consumer spending,
which are expected to follow from continued
economic growth, augur well for the retail sector,
which should enhance the investment potential of
■kites.
In the industrial sector, there has been a
marked increase in the availability of industrial space
in recent years. Most of the planned new construc
tion concerns business parks and multi-tenanted
premises, often in combination with office
accommodation. Higher architectural standards are
clearly in evidence, akin to those normally
associated with the office sector. Although the
market is showing some signs of saturation, investor
interest is still fairly strong.
The take-up of space on industrial estates
in the Randstad Conurbation (the region incorpora
ting the cities of Amsterdam, Rotterdam, The
Hague and Utrecht) and a number of other key
areas in the Netherlands has significantly improved
recently as a result of which prices have tended to
firm. Industrial estates established on what used to
be agricultural land near Schiphol Airport, have
proved particularly popular in view of the quality of
the surrounding infrastructure. However, other
areas in the Netherlands have had to contend with
disappointing take-up rates for a number of years.
To what extent the degree of oversupply in
the market as a whole has been brought on by the
overzealous lending policies of certain finance
houses is open to question. It is clear that certain
firms have acted more as trend-setters in
encouraging new development projects rather than
mirroring market developments. In a number of
cases, this has had disastrous consequences not only
for the companies concerned, but also for their
clients. In the present reporting period, a substantial
number of finance houses have withdrawn from the
market because of the downturn in activity. The
Board of FGH BANK feels that such developments
are regrettable since they overemphasize the cyclical
nature of the realty market. FGH BANK remains
