Portfolio - operation

Rental policy

The portfolio gross rental income in 2024 was €172.3 million, compared to €164.2 million in 2023. This growth is a result of project completions in preceding quarters and the annual rental increase. As part of our asset management strategy, it is our goal to optimise the rental prices within the constraints imposed by regulation and with consideration for our tenants.

Legalisation caps the permitted rent increase, as it depends on inflation (consumer price index, CPI) or at wage growth (“CAO-loonstijging”)+1%. 1% is added to the lowest of these percentages and the sum is then the maximum rent increase. We implemented the annual rent increase in July. On average, annual rents increased by 4.1%, which is 2.5% below the 2023 wage growth of 6.6%.

Vacancy

We aim to optimise the occupancy rate of our portfolio by investing in the quality of our properties and our service to tenants. In 2024, we realised a vacancy rate of 1.8%*, well within our target of 2.0%. This figure includes operational vacancy, renovation vacancy (existing portfolio), sales vacancy and initial vacancy (newly built properties). The low vacancy rate is indicative of the quality of our portfolio and the ongoing demand pressure on the housing market. 

Table 1 lists the ten investment properties/districts with the highest operational vacancy as a percentage of the total portfolio vacancy.

Figure 20: Vacancy

_{**Total vacancy excluding sales vacancy is comparable with the occupancy rate in the key figures. The sales vacancy isn't
taken into account within the occupancy rate, since this is administrated in realized capital gains.}

Operating costs

Operating costs as a percentage of the theoretical rental income was 24.3% in 2024 (2023: 23.4%). This was slightly above Budget and was caused by higher maintenance costs, higher property management costs and a rent arrears provision for a large commercial tenant.  

Tenant satisfaction

We aim to achieve a minimum tenant satisfaction score of 7.5 (out of 10) and outperform our peers in the IVBN tenant satisfaction benchmark. In 2024, the ARC Fund scored a 7.3*, compared to 7.0* in 2023. This is an improvement on last year and above the benchmark. The improved performance was driven by higher scores of all three components . The overall score of 7.3 is the average of three components: quality of the home (up from 7.6 to 7.9), the living environment (up from 7.5 to 7.6), and property management (up from 6.1 to 6.5).

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 93.}

Figure 21: Tenant satisfaction*

^{Score out of 10}

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 93.}

Sustainability

We invest in the energy efficiency of our properties to achieve a future-proof and Paris-proof portfolio. By monitoring the energy consumption of our properties, the ARC Fund is able to set goals for optimisation. We increasingly use smart meters with a digital dashboard to track and report on the sustainability performance of our buildings. The coverage rate representing the percentage of properties included in energy/gas consumption is set to increase over time to be able to improve insights in actual use figures. The coverage rate is 96.7% of the portfolio, which represents an increase compared to the prior year (94.7%).

The ARC Fund aims to lower the energy consumption of properties and reduce the CO₂ emissions of its portfolio. We monitor the energy consumption of our properties to set goals for optimisation. We use smart meters and an Environmental KPI dashboard to track and report on the sustainability performance of our buildings. Energy consumption, carbon emission and water use data for the prior year is not completely available at date of submission of this annual report. Therefore, the 2023 figures are included in this report.

Energy Use Intensity (EUI) provides a consistent unit of measurement to report on the energy efficiency of our properties by converting heat energy in GJ and gas use in m to kWh/m²/year. In 2024, the average EUI of our properties was 82.6 kWh/m²/year*, compared to 93.1 kWh/m²/year in 2023. The energy use of newly built buildings in 2023 is taken into account in the current figures, this results in a decrease of the EUI. New builds must adhere to strict energy efficiency standards and therefore perform better than renovated buildings. They are significantly better insulated and make use of gas-free heating systems (e.g. hybrid or ground-source heat pumps), which consume less energy than modern systems.

We aim to reduce carbon emission by 50% between 2020 and 2030 by investing additionally in assets that are at risk of becoming ‘stranded’, meaning that they do not meet future energy efficiency standards and are at risk of becoming economically obsolete. The carbon emissions of the portfolio in 2020 averaged 36 kg CO₂/m²/year. A 50% reduction therefore amounts to an average maximum carbon emission in 2030 of 18 kg CO₂/m²/year. In 2024, the average carbon footprint was 17.1 kg CO₂/m² per year (2023: 19.9kg CO₂/m²). We are well on track to achieve our 2030 reduction target.

GRESB

The ARC Fund has been participating in the Global Real Estate Sustainability Benchmark (GRESB) since 2013. GRESB allows for an objective assessment of the sustainability of our portfolio performance, based on benchmark parameters. The ARC Fund's score fell from 91 points in 2023 to 89 points* in 2024. The decrease is in line with the overall point decrease of the entire Dutch benchmark. Despite a slight drop in our score, we successfully retained our five-star rating and moved up from 9th to 8th place in the benchmark.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 93.}

GPR

We aim to achieve GPR/BREEAM certification for at least 80% of our portfolio. In 2024, we achieved this goal with 79.7% of our portfolio certified, up from 75.6% in 2023. GPR and BREEAM are instruments for measuring the sustainability of a property. We will continue to obtain GPR certificates to improve our insight into the sustainability performance of our portfolio, set optimisation targets and improve our GRESB score.

The ARC Fund portfolio composition of Energy Performance Certificates (EPC-labels) is 98% A label or B label.

EU Taxonomy

During 2023, the ARC fund voluntarily determined for the first time what the EU taxonomy alignment for the portfolio is. 

Based on the EU Taxonomy Regulation (EU) 2020/852, this annual report outlines ARC Fund's alignment with the criteria set forth in the regulation, aiming to provide transparency regarding our environmental performance and commitment to sustainable development objectives. The SFDR Annex included in the annual report as other information contains three required Taxonomy KPI’s. In addition to that, we have also voluntarily assessed our real-estate-related assets only against EU Taxonomy alignment criteria of Climate Change Mitigation activity 7.7. Based on this alignment assessment, we are able to categorise 94% (2023: 95%) of assets as taxonomy aligned. Unlike last year, the 2024 assessment includes assets under construction, other assets, and cash in the analysis. This change is also reflected in the comparative figure for 2023. Our commitment to sustainability is reflected in our business practices and investment strategies.