Logistics investment market delivers new record result
Transaction volume rises to €2.7 billion in the first three quarters
Transaction numbers double year-on-year
Prime yields stable at 5.00%
The transaction volume on the German logistics investment market came in at €2.7 billion in the first nine months of 2016. Following a brief summer break, the 2015 record result was outstripped by €328 million, representing growth of 14%, on the back of a strong third quarter with more than €952 million. Investment in logistics properties therefore closed with the highest level ever for a nine-month period since records began. This is the conclusion of a current analysis prepared by the commercial real estate services company CBRE.
The high transaction volume in the logistics investment market also reflects the pronounced shortage of available property and yield compression, which is even more evident in other asset classes. We are therefore seeing investors’ growing interest in alternative investment segments, with investment in warehouse and logistics real estate experiencing further significant growth.
Number of transactions climbs by 50%
The rising interest in the German logistics investment market is reflected not only by the higher volume, but also by the number of registered transactions which have increased by 50% to over 231 transactions in a year-on-year comparison.
The share of the logistics investment market in the overall investment transaction volume has therefore climbed to 8.4% (up 2.1%-points year-on-year).
This is ultimately also attributable to the ongoing success of e-commerce which, due to changed buying behaviour, is having a positive impact on retail logistics. Properties built by automotive industry users are also boosting the investment market. In an environment like this, it comes as no surprise that distribution properties are the strongest asset class within the logistics investment market.
They accounted for almost €1.6 billion, equivalent to around 57% of the logistics investment volume allocated overall.
In the first three quarters, the warehouse segment accounted for investments of €951 million, equivalent to a share of 35%. Thanks to numerous transactions, the capital allocated to warehouses almost doubled in comparison with the first three quarters of 2015. Production buildings came in third place with an accumulated transaction volume of €234 million.
Cash-rich asset and fund managers proved to be the strongest buyer group, acquiring warehouse and logistics properties worth €731 million. Next come listed property companies and REITs (€490 million) and the group of open-ended real estate and special funds (€478 million).
Prime yields stable at 5.00%
Prime yields of 5.00% in the established markets of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich remain unchanged for now at the low level of the previous quarter despite the high pressure. The yield spread compared with the traditional asset classes of office and retail real estate still stands at 175 basis point – the gap to the benchmark yield of a 10 year Bund continues to be 500 basis points higher. “Against this backdrop, we anticipate a steady high inflow of capital into German warehouse and logistics properties in the coming months, driven above all by overseas investors,” Linsin comments.
International investors remain the strongest buyer group
The share of international investors, who invested €1.4 billion in the first nine months and contributed more than half to the transaction volume in the logistics segment, continues to run at high level. The combined investment of players from the United States (€721 million) and the United Kingdom (€277 million) alone already made up just under €1 billion. Asian investors nevertheless also accounted for 7% of the logistics investment volume. “They see Germany as a ‘safe haven’ for their abundantly available resources,” Linsin says. By contrast, domestic players lifted their share by 12%-points to 48% in a year-on-year comparison.
Single deals determine market activity
Single deals dominated market activity in the third quarter, resulting in the overall portfolio share dropping below the 50% mark again for the first time since the start of the year – at 47%, it is nonetheless 12%-points higher than the year earlier figure.
A closer look at the portfolio share shows that German investors generally transact single acquisitions. “Even if three of the five largest single transactions were concluded by international players who, by themselves, already accounted for €155 million, international investors are increasingly attracted to large portfolios of warehouse and logistics real estate,” Oulds says. The portfolio share of international investors, which stood at €958 million, reached around three quarters, compared with domestic investors who invested only one quarter.
Forecast: 2015 record result of €3.9 billion for the transaction volume within reach
“As a leading production location with many market leaders and robust economic data, coupled with a world-class infrastructure at the heart of Europe, Germany excels first and foremost as an export nation. According to the most recent forecasts of the ifo Institute for Economic Research, in terms of its export surpluses Germany is likely to outperform even China by the end of the year,” Linsin says.
“Along with these excellent economic framework conditions, we expect a substantial year-end rally thanks to a well-filled project pipeline. Given the current mandates, there are many investment opportunities in the offing, which leads us to believe that the record results achieved in 2015 may be repeated if marketing is successful,” Oulds predicts.
Industrial & logistics transaction volume in Germany
Source: CBRE Research, Q3 2016.
German industrial & logistics investment market – y/y comparison
Source: CBRE Research, Q3 2016.
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