Uncertain global trade is reshaping the economic growth path
Domestic demand as a stable growth engine
Geopolitical tensions and disruptions in global trade weighed on global economic sentiment in 2025. Toward the end of the year, however, markets began to structurally incorporate the new trade barriers into their expectations. Companies diversified their supply chains to reduce the risks associated with bilateral trade conflicts. In addition, actual tariff levels turned out lower than initially announced, which meant the global economy suffered less damage than feared.
As a result, the overall impact on the world economy, and on the Dutch economy in particular, remained relatively limited. The Dutch economy grew by 1.4% compared with 1.5%, only a minimal reduction from the growth expected at the start of 2025.
Consumption and government investment as growth drivers
Domestic consumption and government investments are expected to be the main drivers of growth in the coming years. The rise in domestic consumption is strongly supported by the anticipated further increase in the purchasing power of Dutch households. Declining inflation and rising wages reinforce this effect, driven by a structurally tight labour market. At the same time, large-scale public expenditures such as higher defence budgets, continue to stimulate economic growth across Europe.
Bottlenecks limit growth prospects
Despite this, several factors continue to slow the pace of growth. Geopolitical tensions and sluggish global trade are weighing on exports and investments worldwide. As a result, the growth outlook for 2026 has been revised downward to 0.8%. After this phase of normalization, however, a renewed acceleration is expected further ahead.
Structural challenges such as labour shortages in key sectors and slowing growth in labour productivity, continue to limit the economy’s long term growth potential. In addition, constraints related to nitrogen emissions and limits on electricity grid capacity are hindering economic activity, particularly in construction and industry. Political stability, an enabling government, and substantial investments in infrastructure will all be essential to unlock the broader growth potential.
Inflation gradually moving toward the desired 2% level
Stronger decline in consumer goods inflation
Inflation in the Netherlands is gradually moving back toward more normal levels after several years of energy crises and supply chain disruptions driven by geopolitical uncertainty. Lower energy and commodity prices, combined with reduced demand pressures, are slowing the pace of price increases. By the end of 2025, inflation had fallen below 3%.
Food prices in particular showed a more pronounced cooling in the second half of 2025, increasing price predictability for both consumers and businesses. Consumers feel more in control of their day-to-day expenses. Businesses can plan investments with greater confidence, as price developments have become less volatile.
Services inflation remains persistent
Services inflation, however, remains relatively high at around 5%. Strong wage growth continues to keep price pressures elevated in this segment. As a result, the Dutch inflation rate remains above the European average. In a cooling economy, this level is likely to come under pressure. Many companies are reorganising processes and exploring more concretely how technology can be used to curb labour costs. Large organizations are taking the lead in this transition. For example, ABN AMRO and ABP announced plans to cut more than 1,000 jobs. Automation and digitalisation act as key levers to structurally offset rising salary costs.
Consumer confidence rises, producers remain cautious
Cautious recovery in consumer confidence towards 2026
In 2025, confidence indicators in the Netherlands remained low. The recovery seen towards the end of 2024 was offset by uncertainty surrounding trade tariffs. This uncertainty weighed heavily on both producer and consumer confidence, especially in mid 2025. Towards the end of the year, confidence did improve, but overall sentiment remained negative.
For 2026, a gradual improvement is emerging. Declining inflation and greater clarity on trade agreements are boosting confidence. Although still negative, consumer confidence is currently recovering rapidly. A projected increase in purchasing power of 1.3% in 2026, as estimated by the CPB, further reinforces this positive sentiment.
Producers remain cautious
Producer confidence remains fragile for now. Companies are postponing major investments and focusing on consolidating their operations. They are also actively seeking cost reductions through technological innovations such as automation and digitalisation. Confidence is improving only marginally. Due to this caution among producers, economic growth in 2026 will rely more heavily on domestic consumption.
Accelerated adoption of automation and AI driven by tight margins and tight labour market
Labour market remains tight despite a slowing economy
Despite a slowing economy, the Dutch labour market continues to be tight. In October 2025, the number of unemployed people exceeded the number of job vacancies for the first time in four years. However, this turning point does little to change the structural picture. Without migration, the labour force is shrinking, while the old‑age dependency ratio (the share of people aged 65 and over) continues to rise.
This creates an unusual situation: the economy is growing only very modestly, yet wages continue to increase strongly. Companies are experiencing limited revenue growth but face sharply rising personnel costs. At the same time, reducing the workforce is risky, as any acceleration in economic activity would immediately create demand for scarce talent.
Logistics experiences the greatest strain
These bottlenecks are most pronounced in the logistics sector. This sector already relies heavily on labour migrants, while regulation is expected to become increasingly concrete. As a result, more and more companies are opting for automation and robotics.
This strategy requires substantial upfront investments and encourages scaling up and consolidation. This strategy requires substantial upfront investments and encourages scaling up and consolidation.
This shift translates directly into real estate demand. The need for high‑quality distribution centres is increasing—specifically facilities that technically support automation and maximise operational efficiency. In doing so, occupiers adapt to a labour market that is expected to remain structurally tight.
Automation continues to expand across services
Technological adoption is also accelerating in the services sector. Productivity growth per employee has been steadily declining over the past 50 years, while labour costs have risen sharply—particularly in recent years. Collective labour agreement wage growth reached 6.1% in 2023 and 6.5% in 2024.
Although employees still hold a strong position due to the tight labour market, companies’ strategic choices are already clearly shifting. Large Dutch banks and pension administrators are working towards reducing their workforce. AI and automation play a central role in this shift. This results in job losses or job redesign, but also in a broader structural reorganisation of work in the Netherlands.
Urgency for political stability and a more favourable investment climate
Large number of political parties complicates political stability
With the fall of the Schoof I cabinet, a coalition came to an end that had been difficult to form in the first place. The coalition talks lasted 233 days, making it one of the longest formations in Dutch history. With fifteen parties represented in the House of Representatives, political fragmentation remains high, only in 2021 was the number even higher. This fragmentation increases political uncertainty, not only in the Netherlands but across Europe, where short‑term politics increasingly dominates.
The election victory of D66 marks a clear shift in political direction. The Netherlands is moving from a right‑leaning government to a more centrist course. This increases the likelihood of broader support for major policy issues. It strengthens administrative stability and creates room for more consistent long‑term policymaking.
Real estate sector calls for swift action on nitrogen and grid congestion
Yet the upcoming cabinet term requires immediate decision making on crucial dossiers for the real estate market. The Wennink report (2025) on the future of the Dutch economy underscores the need for far reaching choices and investments to remain competitive.
In particular, the nitrogen dossier requires rapid clarity. According to Wennink (2025), the damage caused by the nitrogen standstill in construction and industry amounts to approximately €30.7 billion in lost revenue up to 2030. In addition, grid congestion has become a structural bottleneck. Around 14,000 companies are therefore unable to find a suitable new business location. These constraints hamper growth and delay real estate development.
Attracting foreign capital hindered by fiscal barriers
The (limited) ability to attract foreign capital also poses a major challenge, according to the same report. This is already evident as foreign institutional investors are withdrawing from the Dutch real estate market, often for fiscal reasons. The sector therefore advocates reforms, such as reducing the transfer tax to 6%, in line with other European countries.
In addition, the unequal tax treatment of Dutch and foreign pension funds requires attention. Foreign funds face a disadvantage under the corporate income tax regime. The abolition of the FII regime is the primary reason why foreign core capital is staying away or leaving.
Rising government debt pushes up government bond yields
Government debt rising across Europe, driven in part by higher defence spending
Central banks began gradually lowering their policy rates in early 2025. The ECB, European Central Bank, reduced its policy rate by one hundred basis points. However, yields on ten‑year government bonds remained virtually unchanged. In the Netherlands, yields stand at around 2.8%, compared with 3.1% across Europe. This stability is underpinned by rising government debt levels across Europe. Governments are increasing their investments, particularly in defence. In addition, some countries, such as Germany, are actively stimulating their economies. As a result, public debt is increasing again, after years of reduction following the financial crises and prior to Covid‑19.
Concerns about rising public debt, in addition to the ECB’s scaling back of its asset purchase programme (“quantitative tightening”), are contributing to higher bond yields. In several major European economies, government debt is expected to continue rising steadily. This contrasts with the period after the Global Financial Crisis and before Covid‑19, when stricter fiscal discipline led to declining public debt levels. Part of today’s increasing debt burden can be attributed to higher expected government spending on defence.
Implications for real estate returns
The potential impact on real estate is reduced downward pressure on returns in the short term. Government bond yields are often used as the benchmark for the risk‑free rate. As a result, the yield compression that had previously been expected in the short term is likely to be more limited. Any value growth will therefore need to come increasingly from product optimisation or rental growth driven by scarcity—although the latter is currently mostly confined to prime locations.
The Netherlands as an exception with low public debt
The Netherlands is an exception compared with other European countries, with a government debt level of 44% of total Gross Domestic Product. However, expectations are that Dutch public debt will also continue to rise. This increase is driven not only by higher defence spending but also by growing healthcare expenditures resulting from an ageing population. Nevertheless, the relatively low debt level still provides room to allow public debt to rise further to support larger expenditures that deliver demonstrable economic and societal value.
Pension system transition drives greater focus on higher‑return investments
Transition to the renewed pension system largely in 2026
On 1 July 2023, the Future of Pensions Act (WTP) was introduced—a new law aimed at a major reform of the Dutch pension fund market. In essence, this entails a shift from a ‘defined benefit’ to a ‘defined contribution’ model. This means that pension funds will move towards a more individualised pension system in which collective guarantees disappear and participants receive more individual pension assets and risk‑dependent investment profiles.
Although the law was already enacted in 2023, a transition period applies until January 2028. Meanwhile, the market is already in motion, with many funds announcing plans to implement the reform as early as 2026. Most funds are expected to transition in 2026 or 2027, according to research by BDO.
Shifting Toward Higher-Yield Real Estate Investments
Within the WTP, the lifecycle approach is central, enabling higher risks to be taken especially for younger generations. This means that pension funds will increasingly reallocate capital designated for real estate toward categories with higher expected returns, while maintaining the lowest possible risk profile.
Pension funds now can refine their portfolios and tailor them to specific age groups, with themes and ESG objectives playing a more prominent role. Consolidation accelerates this process: larger funds have international reach and are already focusing on residential, healthcare, and retail real estate with social impact. This also helps explain the very sharp initial yields being paid for residential developments that meet high ESG standards.
Looking ahead, it is expected that higher-yielding real estate sectors will attract more allocation. Attention will increasingly shift toward operational real estate, such as student housing or senior living. At the same time, funds will also consider selling off parts of their existing portfolios.
Cautious recovery and stable real estate yields
Economic growth, but constrained by structural limitations
The Dutch economy faced significant uncertainty in 2025 due to international trade conflicts. However, the actual impact proved limited. Looking ahead to 2026, the outlook is cautiously optimistic, supported by normalizing inflation, rising consumer confidence, and increased spending by both households and the government. At the same time, structural bottlenecks continue to restrict growth potential. Labour market shortages, grid congestion, nitrogen related regulatory challenges, and relatively high energy prices weigh on the economic outlook. Combined with the delayed impact of trade barriers, this results in a moderate growth forecast.
Impact on the real estate market
These macroeconomic trends translate directly into the real estate market in 2026. The retail sector stands to benefit broadly from improving consumer confidence. In addition, limited economic growth combined with structural scarcity, supports rental growth across most subsectors.
At the same time, grid congestion and nitrogen‑related regulations continue to obstruct necessary redevelopment of existing real estate. The effectiveness and decisiveness of the incoming cabinet will therefore play a crucial role in lowering these barriers through targeted policies and investment.
Government investment keeps yields stable
Increased government spending across Europe is driving public debt levels upward. In the short term, this translates into higher bond yields than previously anticipated. This development puts upward pressure on real estate yields. As a result, yields are expected to remain largely stable, despite improving economic sentiment.