Logistics real estate leasing below previous year's level despite strong momentum
Take-up five percent above five-year average at 4.4 million sq m
Virtually no big boxes: deals focused on mid-sized category in the third quarter
Take-up grows seven percent in the Top 5 markets; down 21 percent in the national markets
Full-year take-up potentially more than six million sq m
Take-up of 4.4 million sq m was registered through leasing and owner-occupation of warehouse and logistics real estate in the first three quarters of this year.
This take-up is around 13 percent below the record result achieved in the first three quarters of 2016. The current result is nevertheless still five percent higher than the average take-up in the first three quarters of the past five years.
This is the conclusion drawn in analysis prepared by integrated commercial real estate services company CBRE.
Take-up volume of small and mid-sized areas increases
Over the course of the current year, we have seen take-up rise further in the smaller and mid-sized segments over 5,000 sq m.
The number of transactions in the segment of 50,000 sq m and more has fallen in comparison with the previous year. Consequently, only three deals were registered in the last nine months, instead of 13 in the previous-year period. “The decline in large-scale transactions registered does not reflect the upbeat sentiment currently prevailing in the market. In fact, there are several large-scale deals in the pipeline which can only be counted in the coming quarters,” Koepke states. Most of the space covering 1.65 million sq m was taken up in the mid-sized segment of 20,000 to 49,999 sq m.
Existing stock and leasing gaining in importance
Existing stock and leasing have played an increasingly greater role over the past nine months. The transaction volume in existing space, for instance, climbed by 18 percent to approx.1.63 million sq m, which includes the leasing of 120,000 sq m by Rhenus in Hückelhoven, North Rhine-Westphalia. By contrast, the volume of new building projects declined 24 percent to approx. 2.78 million sq m, which brings the take-up of new property developments to 63 percent compared with still 73 percent in the year-earlier period. “Building new logistics properties is currently partly experiencing delays due to pending building permits, which in some cases can take up to two years to grant with big boxes, and also due to the capacities of construction companies which are largely booked,” Koepke explains. “Together with strong user demand, these are the reasons for the importance of speculative development continues remaining at the low level seen in previous years,” Koepke says.
Due to a lower level of new build transactions, owner-occupation take-up also dropped 24 percent to approx. 1.58 million sq m. Owner-occupations accounted for a share of 36 percent in the overall volume of the German warehouse and logistics real estate market (Q1-Q3 2016: 41 percent).
Berlin reports growth of 50 percent
While take-up throughout Germany declined by 13 percent, warehouse and logistics properties in the Top 5 cities saw growth of seven percent. “The fact that there was another increase in the take-up in the Top 5 markets - despite the short supply - illustrates the intensity of the search for available space,” Koepke says. Berlin accounted for the lion’s share of this growth with a year-on-year increase of around 50 percent in take-up which came in at 357,000 sq m in the first three quarters of the year.
The steepest fall in take-up volume was seen in North Rhine-Westphalia where, at approx. 1.18 million sq m, around 34 percent less was taken up compared with the previous year’s period. The decrease is linked to large-scale transactions.
The decline in the logistics property market in North Rhine-Westphalia goes hand in hand with the lack of large-scale transactions which we were still seeing in this region last year. This includes the leasing of 225,000 sq m in Marl by the Metro Group in 2016 and the deals transacted by Amazon involving 100,000 sq m in Werne and more than 80,000 sq m in Dortmund in two buildings. Transactions in this segment size are nevertheless on the cards in the coming quarters.
Strongest demand from logistics providers
Contrary to the general decline in volumes, the transport and logistics user group has raised its take-up by around 43 percent (up 20 percent year on year). By contrast, the volume of the second and third largest user group of retail (share of 32 percent, down 16 percent) and production (share of 20 percent, down 18 percent) settled at a lower level. The decrease in take-up by retailers is primarily attributable to large-scale transactions of Metro and Amazon in 2016.
Take-up in the Top 5 locations and other markets (in sq m)
*Deals above 5,000 sq m
Source: CBRE Research, Q3 2017.
Forecast: six million sq m in the full year
“The dynamic demand on the warehouse and logistics property market reflects the German economy’s good economic fundamentals. The economic growth forecast for 2017 will continue to drive this momentum in the logistics real estate market in the future as well, because of Germany’s role as a key hub for international trade flows and due to growing domestic demand,” Linsin explains.
“The momentum and positive sentiment on the logistics property market will filter through in the coming quarters, with a number of deals which are currently in the pipeline. For the full year, we anticipate a strong result above the six million mark although we consider it unlikely that there will be a repeat of the exceptional record year 2016,” Koepke adds.
German logistics market: take-up (leasing and owner-occupied)
* only annual figure available
Source: CBRE Research, Q3 2017
Selected take-up in Q3 2017 (ytd)
Source: CBRE Research, Q3 2017.
Head of Industrial & Logistics Germany
+49 69 17 00 77 671
Dr. Jan Linson
Head of Research Germany
+49 69 17 00 77 663
Co-Head of Industrial & Logistics Germany
+49 69 17 00 77 43
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 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide.
CBRE offers a broad range of integrated services for the entire lifecycle of a property, from strategic and technical advice such as in sales and acquisitions or renting and letting, to managing and valuing properties to portfolio, transaction, project and facility management. CBRE offers individual advice for all asset classes from a single source.
Since 1973, CBRE Germany has been represented by its head office in Frankfurt am Main; there are further branch offices in Berlin, Düsseldorf, Essen, Hamburg, Cologne, Munich, Nuremberg and Stuttgart.