Land Policy and Vacancies in the Metropolitan Amsterdam Office Market

In this chapter, we focus on office vacancy. In the past decade, there has been a considerable increase of the availability of offices in the Amsterdam region. In 1999, the actual vacancy was close to zero. By now, supply of offices is approaching 20 % of total stock. In many areas, it is already over 25 %. Even more important, the vacancy rate of newly built offices is still low, while structural vacancy of older offices is soaring. Various authors assume that vacancy is a temporary mismatch between supply and demand. However, in Amsterdam a permanent tendency to oversupply exists which is related to the institutional structure of the market. Economic, financial and spatial policy pursued by municipalities in the Amsterdam region favour the construction of new offices. Investors have been willing to acquire all newly built offices. An addition to existing theory enabling us to explain these developments. Almost all parties involved gain from new office construction. New developments give rise to a filtering down process on the office market. As soon as this process has resulted in the existence of two separate markets of new and older offices, the mechanism that restores equilibrium is no longer effective. As a consequence, in this situation, office vacancy has no limit