• Transaction volume of almost € 1.1 billion in the first quarter

• Share of logistics real estate in the overall transaction volume at a historically high level of 13%

• Asset and fund managers with strong equity base as the strongest buyer group

• Portfolio share driven up by international investors

• Prime yield of currently 5.20% remains stable – growing pressure to invest

• Full-year investment volume expected to exceed the level of the previous year

Having delivered a very strong result, the investment market for warehouse and logistics real estate got off to a flying start in 2016. According to most recent analysis prepared by commercial real estate services company CBRE, the logistics investment volume amounted to almost € 1.1 billion in the period from January to March. With the second highest result for the start of a year and the third best quarterly result since records began, the transaction volumes of both the year-earlier result (up 135%) and the average over the past five years (up 78%) were significantly exceeded.

A comparison with the traditional office and retail asset classes in particular shows how attractive German warehouse and logistics real estate is for investment. “The logistics asset class, with a relative share of 13% in the overall commercial transaction volume, is establishing itself as the third-largest real estate segment after office and retail and, in comparison with the prior-year period, grew by 8 %-points. This is also the highest relative share in the overall transaction volume which we have recorded for logistics properties so far”, states Oulds. Greater interest by domestic and international investors has been fanned by the ongoing success of e-commerce which has had a positive impact on retail logistics in the wake of changed purchasing patterns.

International investments double in a year-on-year comparison
The interest of international investors in German warehouse and logistics real estate continued to run at a very high level in the first three months. “The investment market for warehouse and logistics properties benefited from a strong inflow of foreign capital owing to Germany’s outstanding economic outlook and its sophisticated infrastructure”, explains Oulds. International investors acquired logistics properties worth € 515 million across Germany, which is almost double the capital they invested in the first three months of 2015. Investors from the United States were particularly active, investing more than € 300 million, which accounts for 28% of the overall logistics transaction volume. Above all, however, domestic players increased the capital allocated to warehouse and logistics real estate by € 350 million to € 557 million in the first quarter, thereby contributing 52% to the overall transaction volume for logistics properties.

Portfolio share driven up by international investors
The six largest portfolio transactions alone account for € 377 million. All in all, the portfolio share grew by some 35%-points to now 54% in comparison with the year-earlier period. “While German investors preferably put their money into German logistics real estate in the context of individual acquisitions, we have observed greater interest on the part of international investors in large packages of warehouse and logistics real estate”, states Oulds. Of the largest portfolio transactions, four packages were transacted by international investors, bringing international investors’ share in the portfolio quote to 64% compared with domestic investors’ share of only 38%.

Asset and fund managers with strong equity base as the strongest buyer group
Similar to the year-earlier period, the strongest buyer group in the first three months were asset and fund managers who invested approximately € 422 million (39% of the overall logistics transaction volume) in German warehouse and logistics real estate. In second and third place came developers (€ 154 million) and insurance companies and pension funds (€ 146 million), each of which contributed a share of some 14%. Also on the seller side, developers were among the most active players in the first quarter, investing € 670 million, corresponding to a share of 63%. The sale of the large-scale real estate property package developed by VGP into the joint venture with Allianz Real Estate contributed to this high proportion. Corporates were the second largest group of sellers, contributing € 140 million, or 13% of the overall volume, followed by asset and fund managers with € 83 million (8%).

Warehouses as the most popular usage type
At € 571 million, 53% of the transaction volume was invested in the warehouse segment in the first three months, thereby almost trebling its share in comparison with the first quarter of 2015. Properties were largely acquired in the context of portfolio acquisitions, such as the Sky portfolio acquired by Blackstone from Australian developer Goodman. Transactions involving distribution centres came in at € 338 million, reporting fresh growth and contributing some 32% to the transaction volume. Distribution and handling warehouses were sold exclusively as packages, including in particular real estate acquired by Dutch real estate company Geneba Properties, as well as a portfolio comprising five properties acquired by Swiss Global Gate Capital Management for their investment fund. The production warehouses segment took third place with €164 million and 15%. In comparison with the first quarter of 2015, the allocated transaction volume in production real estate – light industrial properties above all – quadrupled, contributing additional around € 134 million.

Growing pressure on net prime yield
High demand, accompanied by increasingly scarce product availability, is putting growing pressure on net initial yields for premium products. In case of logistics properties featuring cutting-edge facilities and let long term in the established top logistic markets of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich, net initial yields continue to come under pressure. At present, they remain stable at 5.20%, 60 basis points below the previous year’s figure. “In comparison with the core products in Germany’s traditional office and retail asset classes, yields for investors remain extremely attractive. We therefore anticipate a persistently high level of investment capital in German logistics real estate from institutional investors, both domestic and international, seeking to satisfy their yield requirements”, says Linsin. “Compared with the office and retail asset classes, the logistics segment delivers a yield spread of up to 170 basis points. The gap between the benchmark yield of a 10-year Bund currently amounts to more than 500 basis points. Along with the macroeconomic situation of Germany as a production and logistics location, this is an important reason for institutional investors to reshuffle their portfolios in favour of logistics properties”, states Linsin.

Transaction volumes likely to exceed the year-early result
Given investor propensity to turn increasingly to the logistics segment, prompted by comparatively higher yields and broader range of good investment properties at relatively moderate purchase prices, investment momentum in the German logistics investment market is set to continue. “In view of the very good performance in the first three months, we anticipate sustained dynamic development for the year as a whole. Consequently, the transaction volume of 2015 is very likely to be exceeded in 2016“, comments Oulds.

Logistics investment market in Germany

Source: CBRE Research, Q1 2016.

German logistics investment market

Source: CBRE Research, Q1 2016.

Contact:
Kai F. Oulds
CBRE GmbH
Head of Logistics Investment
+49 69 17 00 77 33
kai.oulds@cbre.com

Dr. Jan Linsin
CBRE GmbH
Head of Research Germany
+49 69 17 00 77 663
jan.linsin@cbre.com