• Transaction volume of €1.4 billion

• Growing trend toward properties with shorter lease terms and in secondary locations

• Dynamic market activity anticipated over the remainder of the year – investment volume of at least €4.5 billion

The transaction volume on the German warehouse and logistic real estate market got off to a very dynamic start to the year. At more than €1.4 billion, the year-earlier result was outperformed by a third, marking the best start to the year since records began in 2003. This is the conclusion of a current analysis prepared by the commercial real estate services company CBRE.

Logistics segment accounts for high proportion of funds committed in the overall real estate investment market

The share in the commercial real estate investment market came in at more than 11 percent in the first three months, which is significantly higher than the average of the last five years. “German warehouse and logistics properties are increasingly becoming an investor favorite – in particular with international players who accept the higher price level due to the lack of investment alternatives and raised their share in the allocated logistics investment volume by almost 15 percentage points to around 60 percent compared with the first quarter of 2016,” Oulds says.

Prime yields under pressure – growing interest in properties in secondary locations

The greater interest of players in the logistics real estate in Europe’s largest economic and production location has widened the gap between supply and demand, which is reflected in sustained pressure on prime yields. “For top logistics properties in the established market areas of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich we are seeing purchase price multiples of up to 19.5 in some cases,” Oulds says. Net initial yields for logistics properties featuring modern fit-outs and long-term leases still remain stable at a level of 4.90 percent, unchanged in a quarter-on-quarter comparison. “As the year progresses, however, we expect another decline,” Oulds explains.

“Consequently, we are seeing a shift toward existing properties with shorter lease periods, as well as a growing interest in contemporary, new-build warehouse and logistics properties in secondary locations with shorter lease terms – these properties are of strategic importance for user groups from a range of different industries and therefore fulfil an important function,” Linsin comments.

Outlook: transaction volume of at least €4.5 billion anticipated in 2017

“After an extremely dynamic opening quarter, we anticipate similarly large-volume pan-European portfolio transactions over the course of the year, and therefore a continuation of the investment story on the German logistics real estate market,” Linsin says. ”Generally speaking, we are very confident that, despite limited product availability, we will see brisk market activity with an investment volume of roughly€4.5 billion, at minimum at the year-earlier level. With the realization of one or other of the announced platform takeovers, there is potential for a significantly higher annual result,” Oulds adds.

Source: CBRE Research, Q1 2017

Contacts:

Kai F. Oulds
CBRE GmbH
Head of Logistics Investment
+49 (0)69 17 00 77 33
kai.oulds@cbre.com

Dr. Jan Linsin
CBRE GmbH
Head of Research Germany
+49 (0)69 17 00 77 663
jan.linsin@cbre.com