Dynamic trend of up-take in the logistics real estate market persists
Take-up of almost 1.5 million square meters in the first quarter – best result for a start to the year since records began
Dynamic take-up determined by a number of contracts signed in the medium sized category
New building development increasingly important
Frankfurt is Germany’s logistics market with the strongest take-up; of the Top 5 markets, Munich reports largest increase in take-up
According to a current analysis of commercial real estate services company CBRE, a total of 1,482,000 square meters (including owner occupations) were taken up in the first quarter of this year.
With an increase of around 459,000 square meters, up 45 percent compared with the weak prior-year result, the vigorous letting momentum seen in the last quarter of the past year carried on into the new year, allowing us to report the best result for a first quarter since records began.
This result therefore almost matched the average quarterly take-up in 2015. Accordingly, the slump in the stock markets at the start of the year and economic uncertainties did not brake the logistics real estate letting market.
Share of owner occupation in Germany above the long-standing average – property development gaining in importance
Alongside three large-scale take-ups of more than 50,000 square meters, contracts signed in the size categories of between 20,000 and 50,000 square meters also contributed to the good result, accounting for a combined one third of total take-up. “Given that the ten largest contracts comprised four owner-occupier deals, including the logistics new build of Adam Opel AG in Bochum covering 95,000 square meters, it was to be expected that the national owner-occupation rate of 40 percent would be the long-term average of 37 percent”, said Koepke. “In addition, we registered a high proportion of new builds across Germany that had grown a good 18 percentage points to 69 percent, which is notably higher than the result of the past three years. Owing to the increasingly acute lack of suitable existing properties, and despite the rising number of speculatively built warehouse and logistics space available in the short term, often built-to-suit property developments were necessary to satisfy user demand.”
Frankfurt as the logistics market with the greatest take-up
In the top logistics markets of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich, take-up of 475,100 square meters in the period from January to March 2016 remained stable at the prior-year level and therefore 10 percent above the five-year average of the respective first quarters. From a regional standpoint, however, there were a few differences: By far the largest take-up of 170,500 square meters was reported in the logistics market area of Frankfurt/Rhine-Main. Especially the letting of a new built-to-suit property development of around 83,000 square meters in Biblis to Action, a Dutch non-food retailer, contributed to lifting the result by a remarkable 53percent above the prior-year level. Hamburg’s logistics market took second place with 126,200 square meters (down 8 percent year-over-year). No transaction of over 20,000 square meters was concluded here in the first quarter. Berlin came third with 86,300square meters. As large-scale transactions did not materialize, Berlin’s warehouse and logistics market segment reported a decline of 34 percent in comparison with the first quarter of 2015. By contrast, Munich registered the largest increase in take-up – not least due to the leasing of an online fashion retailer (14,200 square meters) – to 60,200 square meters in the first quarter, up 68 percent compared with the prior-year period.
Top 5 locations see marked decline in the owner-occupier ratio
The top locations reported brisk demand in the small size category. As a result, the majority of take-ups, measured by the number of transactions based on floor area, fell below 5,000 square meters. While approximately 194,000 square meters were taken up in just under 150 registered lettings and owner-occupier deals, some 40 transactions, each exceeding 5,000 square meters, together add up to approximately 281,000 square meters. The owner-occupier ratio in the top locations came in at only 14 percent, falling significantly short of the prior-year result of around 25 percent.
Take-up in the Top 5 locations and other markets (in square meters)
Source: CBRE Research, Q1 2016
Significant increase in take-up outside the top locations
Outside the Top 5 locations, registered take-up in the first three months was marginally higher than one million square meters, thus almost double the prior-year result, with an increase of 465,100 square meters. The significant growth in take-up was realized first and foremost by numerous contracts concluded for property developments, accounted for in almost equal measure by leases (48 percent) and owner-occupier deals (52 percent). With a take-up of 808,000 square meters, four fifths were registered in property developments outside the top locations, clearly outperforming the average of 53 percent in the past two years. This trend was driven in particular by retail companies that accounted for 39 percent of the national volume of new builds, as well as logistics service providers (27 percent), followed by manufacturing companies (23 percent) and companies from other sectors (11 percent). “In terms of the usage structure, there has never been such a diverse array of companies actively wanting logistics space. In particular the steady growth in online trading and the associated adjusting of logistics processes to accommodate e-commerce concepts and multi-channels pushed up demand for logistics space”, explained Koepke.
Prime rents running at a steady level
Despite persistently strong user demand and increasing product scarcity, prime rents remained stable in comparison with the prior-year quarter. Measured against the first three months of 2015, monthly prime rents in Munich were adjusted by 4 percent to currently € 6.75 per square meter and month, which makes Munich by far the most expensive logistics location in Germany, followed by Frankfurt/Rhine-Main (€ 6.20), Hamburg (€ 5.70) and Düsseldorf (€ 5.40), where monthly prime rents stayed at the year-earlier level. Despite a distortion in the rental price range, Berlin remains Germany’s cheapest logistics hub (€ 4.80). “Prime rent for high-quality logistics space in the city has risen by 4 percent. At the same time, we also registered a 9 percent increase in the lower end of the rental band, which is catching up as a result of the extremely dynamic trend of the Berlin market in recent years”, explained Linsin. A more discerning look, however, reveals counter trends. “While rents in locations outside conurbations remain at a low level, market rents in urban locations have risen due to a growing shortage of space”, added Koepke.
Take-up anticipated at the prior-year level
According to the BVL logistics indicator, logistics service providers’ business expectations suggest a positive outlook for the coming quarter. “The general outlook for Germany’s economy is still in an upward trajectory, so we assume that this will have a positive impact on the German logistics real estate market”, said Linsin. “In view of the best first quarter since records began, we are sticking to our forecast and anticipate take-up of between 5.5 and 6 million square meters”, stated Koepke.
German logistics market: take-up (lettings and owner-occupations)
Source: CBRE Research, Q1 2016