German logistics real estate market: takeup 2016 sets new record
Take-up posts 6.7 million sq m, up 11% year-on-year
New build share climbs to 72%
Hamburg and Frankfurt as the strongest logistics hubs of the Top 5 locations
North Rhine-Westphalia market with strongest take-up of 2.3 million sq m
Optimistic outlook: take-up of 6.5 sq m possible in 2017
The German warehouse and logistics property market achieved a new record with take-up of around 6.7 million sq m through leasing and owner occupations, outperforming the ten-year average by 51%. This is the conclusion drawn in a current analysis prepared by commercial real estate services company CBRE.
Thanks to a good economic environment we were able to report even and sound quarterly results over the full year, representing an overall increase of 11% above the year-earlier figure and eclipsing the last record result of 2015.
Strong demand in the warehouse and logistics market throughout Germany is broadly distributed and has been given an additional boost by the rapid and accelerating growth of online trading.
Above-average proportion of owner occupations and new builds
At 39%, the proportion of owner-occupation is an overall 6 percentage points higher than the year-earlier figure (increase of more than 607,700 sq m to 2.6 million sq m). The share of new builds has even increased by 10 percentage points to 72% (up more than 1.1 million to 4.8 million sq m). “The good pan-German take-up is primarily due to the high take-up by owner-occupiers outside the top locations. Owing to the shortfall in the supply of existing stock, and in response to the growing importance of retail logistics due to online trading and the realignment of the supply chain under ‘Industry 4.0’, these occupiers require increasingly larger and more modern space. Here we have observed that owner occupiers almost exclusively realise property developments and only rarely find suitable vacant buildings from the existing stock,” Koepke explains.
Top 5 logistics markets deliver a stable annual result at a high level
Take-up in 2016 in the established warehouse and logistics markets of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich has settled for the third time above the two million square metre mark last seen in 2011 and 2015 and, at 2.1 million sq m, has almost reached the previous year’s level. “With an equally high letting performance of some 1.7 million sq m, the marginal decline of less than 3% compared with 2015 is attributable to no large-scale owner-occupied deals taking place in the five large logistics hubs which saw take-up of only 400,000 sq m. In any case, owner-occupied take-up traditionally only makes a small contribution to take-up in the top locations,” Koepke explains.
A closer look at the individual top logistics market areas reveals disparate trends: While the markets of Berlin (351,400 sq m) and Düsseldorf (203,300 sq m), with a decline in take-up of 18% and 45% respectively as against the previous year, delivered an average annual result over a five-year period, Munich (304,600 sq m) delivered one of the best results since 2011, up 47% in a year-on-year comparison. The traditionally strong logistics markets of Hamburg and Frankfurt/Rhine-Main also achieved very good results. Whereas a number of major deals in Hamburg lifted take-up by 13% to 662,000 sq m, making this the best result since 2011, Frankfurt/Rhine-Main saw a dynamic trend over the course of the year, remaining stable and unchanged from the year-earlier level at 593,500 sq m.
In the Rhine-Main region, we also currently see the largest supply reserve of property developments realisable in the short term, with speculative construction not having commenced in 2016 against all expectations. By contrast, the supply of developments realisable at short notice in the other established warehouse and logistics markets is dwindling.
Take-up in the Top 5 locations and other markets (in sq m)
Source: CBRE Research, Q4 2016
Take-up posts record results in the other markets
Take-up of 4.6 million sq m was reported in the warehouse and logistics markets outside the top locations. “We observed an increase in take-up for the fourth time in a row, which brought the result significantly above the four million sq m mark for the first time ever, outstripping the very good year-earlier figure by 18%,“ Linsin says. The realisation of several large-scale property developments in particular boosted the result to a level which was substantially higher than the five-year average (up 37%) and underscores the very high demand from users. “Users from the retail sector proved to be very active, accounting for 37% of the nationwide take-up, ahead of transport and logistics companies with 35%. It therefore comes as no surprise that the five largest deals across Germany as a whole were attributable to retail companies – all in new build projects,” Koepke comments. “User-specific property developer and owner-occupied new builds are becoming increasingly important anyway. The shortfall in existing modern properties with a lot of space is causing users to turn increasingly to property development, with the result that more than 83% of the take-up outside the top locations was realised through new build developments, equivalent to an increase of 12% compared with 2015. By contrast, the proportion of new builds in the established markets stood at only 47%. Viewed from a nationwide standpoint, the already high proportion in this segment has risen by 10 percentage points to 72% in a year-on-year comparison,” Linsin says.
Broken down by area, the Ruhr region accounts for more than 1.1 million sq m. “Together with the cluster markets of Cologne (201,000 sq m), Mönchengladbach (106,600 sq m), the other markets in North Rhine-Westphalia (634,800 sq m) and Düsseldorf (203,300 sq m) as one of the Top 5 centres, take-up came in at almost 2.3 million sq m in North Rhine-Westphalia, with this federal state therefore accounting for around one third of the nationwide take-up. Along with the realisation of a number of big boxes thanks to the availability of larger pieces of land, take-up overall was driven by broad-based demand across all size segments, so that this year’s result represents an exceptional increase of 58% compared with the previous year’s performance,” Koepke explains.
The regions around Erfurt (202,800 sq m), Hanover (169,600 sq m) and Stuttgart (140,500 sq m) also ranked among Germany’s logistics markets with the strongest take-up.
Rent adjustments anticipated in the top locations
Due to the low yield level, developers can offer favourable rents for user-specific property developments and the availability of land outside the Top 5 centres which are partly below rent levels for existing properties. “Rents outside the established logistics market generally remain at very attractive level,” Koepke stated. By contrast, the first upward adjustments have been made in the top locations, for instance in Hamburg where prime rent has risen by 2% to €5.80 per square metre and month. Munich remains the most expensive logistics location (€6.75 per square metre and month at the top end), followed by Frankfurt/Rhine-Main (€6.20). Next come Düsseldorf (€5.40) and Berlin (€4.65).
Outlook: stable market at a high level
“The German economy expanded more rapidly in 2016 than in the previous year, driven by strong domestic consumption. The growth rate of 1.9% in the gross domestic product considerably exceeded the two previous years which saw real economic output expand relatively strongly by 1.7% and 1.6% respectively. The growth trend of Germany’s economy remains intact so that, based on very good labour market data and brisk consumer spending, we can expect to see a continuation of the healthy economic trend in 2017 as well,” Linsin stated. “The potential economic and political impact of the Brexit decision and of US foreign policy, however, remains to be seen.” Despite this uncertainty, robust demand for logistics space can currently be assumed, which is likely to be reflected accordingly in higher take-up. “From today’s standpoint, and assuming the economic trend holds steady, a result around the 6.5 million square metre mark appears realistic,” Koepke predicts. “Companies’ focus on cutting-edge logistics space, accompanied by the relatively short supply in the top locations, should lead to a moderate increase in average and prime rents,” Koepke adds.
“Thanks to the growing importance of e-commerce, we can look back on a very dynamic year with a year-end result which exceeded our expectations,” Linsin summarises. “Whether, given the low level of interest rates, another high owner-occupier take-up materialises in the coming year as well remains to be seen,” Linsin adds.
German logistics market: take-up (leasing and owner-occupied)
* only annual figure available
Source: CBRE Research, Q4 2016.
Selected take-ups in 2016
Source: CBRE Research, Q4 2016.
Head of Industrial & Logistics Germany
+49 (0)69 17 00 77 671
Co-Head of Industrial & Logistics Germany
+49 (0)69 17 00 77 43
Dr. Jan Linsin
Head of Research Germany
+49 (0)69 17 00 77 663
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.