German logistics real estate market: Take-up on track for new record high
Big boxes ensure strong market dynamics
Take-up already above the long-standing average by the third quarter
Undersupply curbs momentum in the prime locations – project developments dominate take-up outside the Top 5
New record result anticipated at year-end
The German warehouse and logistics property market saw take-up of a good 5.2 million sq m of warehouse space through lettings and owner occupancy in the first three quarters of the year. This is the conclusion drawn in a current analysis prepared by commercial real estate services company CBRE.
Accumulated take-up is around 7% higher than in the previous year and, at 29%, is significantly above the average of the last five years. This impressively underscores the positive developments in logistics which has had to focus increasingly on cutting-edge warehouse and logistics space due to drastically changing conditions. These changes have come about, for instance, through the growing importance of retail logistics driven by online trading and the realignment of the supply chain caused by ‘Industry 4.0’.
A further driver of the best nine-month result since records began is the strong performance of the logistics property market in North Rhine-Westphalia. Especially the Ruhr area around Bochum, Dortmund, Duisburg and Marl reports take-up of 912,000 sq m over the course of the year to date, realised in particular through big boxes. With 475,000 sq m, this segment alone accounted for 9% of the nationwide take-up.
This includes, for instance, the letting of a logistics centre in Marl where construction is to be completed by Goodman for Metro by 2018 and which constituted the largest deal in the first nine months.
Growing interest in owner-occupied new builds lifts take-up to an above-average level
A closer analysis divided into letting and owner-occupied take-up shows that the pure letting volume at a good 3.1 million sq m remained virtually unchanged from the year-earlier period. “By contrast, owner occupiers increased their relative share in the accumulated take-up by some 9 percentage points to 40% in a year-on-year comparison. Almost all owner-occupancies registered were realised in new property development,” Linsin says.
An above-average result was reported in any case, with a new build share of 73% which, at 14%-points, is substantially higher than the result posted in the last three years. “This clearly indicates a market hallmarked by strong momentum, with little building stock available, which means that users are having to move forward with plans for new builds at increasingly earlier stage,” Koepke comments. Particularly users from the retail industry, but also companies from transport logistics were very active, together generating more than two thirds of the new build volume.
Take-up up outside the top locations increases significantly
A more discerning look at the generally extremely positive trends on Germany’s logistics property market reveals wide variation depending on the region. Take-up in the established warehouse and logistics markets of Berlin, Frankfurt, Hamburg and Munich reports an overall decline of 12%. “The reduction in take-up in the Top 5 was attributable to the failure of large-scale owner-occupied take-up to materialise. Constrained by supply, their take-up was down by 46%. Letting take-up of around 1.2 million sq m, however, remained at the year-earlier level. Accumulated take-up, which amounted to 1.5 million sq m in the prime locations, is generally slightly above the average of the last five years,“ Linsin explains.
Lower take-up in the Top 5 locations was compensated by the take-up in the other markets across Germany which reported year-on-year growth of 17%. At almost 3.8 million sq m, the five-year average was exceeded here by 45% here. The proportion of new builds is particularly high due to the shortage of existing space available for users at short notice. “For the logistics markets outside the prime locations the availability of land is a huge advantage. Here, 84% of the entire take-up was transacted in property development, including nine of the ten largest deals recorded in the first three quarters of 2016,” Koepke stated.
The Ruhr region, where take-up ran at a high level of 912,000 sq m, with the positive impact of the start to construction work on a new building of owner-occupier Adam Opel AG and the letting of the Metro logistics centre in Marl, is followed at a distance by the region of Hanover (212,000 sq m) and the logistics market in the Cologne region (208,000 sq m). “The strong market dynamics in the aforementioned logistics hubs reflects the special nature of the German logistics market. Given the many urban centres and the economically strong and densely populated regions with prosperous production locations, we are seeing a growing number of (retail) companies and logistics service providers settling in these regions as they are seeking proximity to their customers and above all to the end consumers,” says Linsin.
Take-up in the Top 5 locations and other markets (in square meters)
Source: CBRE Research, Q3 2016.
Forecast: New record result anticipated
“Given the sound take-up volume in the first nine months, we believe that the German warehouse and logistics market will continue to write its success story. Demand remains very high across all user groups. With numerous requests for large surface areas currently at the negotiation stage, we expect the fourth quarter to see strong take-up. All the signs point to a full-year take-up in Germany of more than 6.5 million sq m, so we anticipate a new record year,” Koepke predicts.
German logistics market: take-up (leasing and owner-occupied)
Source: CBRE Research, Q3 2016.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.de.