SharePoint Designer 2013: Server-side activities have been updated

When developing custom activities for SharePoint 2013 Workflows, you might run into the problem that SharePoint Designer prompts “Server-side activities have been updated. Please restart SharePoint designer” every time when you try to create a new workflow.

If SPD keeps prompting the message after restarting it, close it, clean the following directories and then restart SPD.

<user profile>/appdata/roaming/microsoft/SharePoint Designer/Proxy/AssemblyCache

<user profile>/appdata/local/microsoft/websitecache/<sitename>