• Half-yearly result with around 3.3 million sq m of take-up significantly outperforms five-year average

• Smaller-size categories dominate market activity – no deals above100,000 sq m

• High letting performance in the top locations – owner-occupation ratio at a record low

• Positive outlook for the second half of 2016 – year-end result of up to 6.5 million sq m possible

Around 3.3 million sq m (including owner occupations) were taken up in the German warehouse and logistics market in the first six months of 2016. With the third best quarterly result since records began, the already very strong, prior-year result was exceeded by eight percent.

Dynamic take-up driven by small-to mid-sized categories
Since, in the first six months, no deal above 100,000 sq m was transacted owing to the scarce availability of large, cutting-edge warehouse and logistics properties, and only seven transactions took place in the segment between 50,000 and 100,000 sq m, contributing with 465,300 sq m around 14 percent to overall take-up, the good half-yearly result is primarily attributable to the smaller size categories. Sixty-five deals were reported the segment between 10,000 and 20,000 sq m, accounting for 26 percent of the take-up at mid-year. Slightly ahead comes the size category of up to 10,000 sq m that, with more than 220 deals recorded, contributed around 29 percent to take-up. “The last two size categories mentioned therefore account for more than half the entire take-up, providing proof of the very brisk demand for medium-size warehouse and logistics buildings. This also underscores the significance of Germany as an important hub for the European and global flow of goods and as a large domestic market with great purchasing power,” Linsin says. The positive development on the German warehouse and logistics market was determined in particular by deals concluded in the take-up segment of between 20,000 and 50,000 sq m. These transactions, with 35 lettings and owner occupations with a registered take-up of over one million sq m, had contributed around one third of the entire volume by mid-year. The most important transactions carried out in this category included, among others, the deals of the two automotive manufacturers BMW and Audi, each involving 45,000 sq m in the Bavarian town of Ergolding and in Soltau, as well as the Adidas leasing of some 40,000 sq m in Lower Saxony’s Neuenkirchen. Food retailer Lidl built an owner-occupied distribution centre with around 42,000 sq m in Radeburg. “The aforementioned transactions reflect the diverse structure of the German economy that, alongside the global players from the producing industry, also boasts a healthy Mittelstand and can rely on a robust domestic consumption. This makes Germany a safe haven, especially in periods of turbulence, to the benefit of the logistics market as well,” Linsin concludes.

Project developments outside the top locations increasingly on trend
With the exception of a new-build distribution property for Action, a Dutch non-food retailer, in Biblis at the edge of the Frankfurt/Rhine-Main market area all transactions above 20,000 sq m took place outside the top locations. “This development is symptomatic of a nationwide trend: Since land available in the Top 5 locations is scarcely affordable, developers and occupiers are seeking an alternative in the development of so-called big boxes in more favourably priced market regions that are also considered good locations in infrastructure terms,” Koepke explains. “This aside, it is worth noting that the 10 largest deals were without exception realized through new-build developments,” Linsin says. An analysis of take-up also delivered proof of this trend towards alternative locations. While 45 percent of take-up in the top locations were realised through property developments last year, this was only 41 percent at mid-year. By contrast, the proportion of new builds in the other markets outside the Top 5 locations has now climbed by 13 percentage points to 81 percent. Throughout Germany, property developments accounted for some 70 percent of take-up. This figure is thus significantly higher than the average new-build proportion. “We have identified a similar development in the share of owner occupations. As a result of the above average letting performance in the top locations, the proportion of owner occupations has halved to 12 percent in a year-on-year comparison, as opposed to the share of owner occupations in the other markets that has risen by 17 percentage points to 51 percent. Taken as a nationwide average, we have registered an owner occupation share that, at 37 percent, is marginally above the long-term average,” Linsin commented.

Lack of space brakes take-up in the top logistics markets
In the logistics markets of the Top 5 cities, take-up stood at more than 980,000 sq m in the first half of 2016. For the first time for three years in a row, the warehouse and logistics market of the top logistics markets did not report an increase in the first half year. “The slight decline in take-up reflects the shortfall in the supply of space in the top locations. The shortage of state-of-the-art large-scale warehouse and logistics buildings meant that higher letting momentum was unable to develop despite strong demand by logistics service providers and owner occupiers, with the result that take-up contracted by 12 percent compared with the prior-year result,” Koepke explains. “Take up has nonetheless settled slightly above the five-year average.”

A closer look shows a clearly disparate development: Munich reported the strongest year-on-year growth: Here four deals, each of more than 10,000 sq m, delivered an impressive increase of 24 percent. A marginal upturn of three percent reflects a stable development in Frankfurt’s market. By contrast, declines were reported in Hamburg (down 12 percent) and Berlin (down 17 percent). “This downturn in take-up has nothing to do with slack demand. Instead it is attributable more to the dearth of modern floor space that is quickly available to the market for letting, above all in the top locations. While, in the 2015 reference period, Düsseldorf’s market reported the highest half-yearly figure to date mainly due to a 63,000 sq m new build for Bauhaus in Krefeld, take-up declined notably here. “The current trend in Düsseldorf’s market region with a downturn of 50 percent reflects an anticipated return to normal levels following the exceptional result. Hamburg’s market is dominated by a shortage of properties which constrained take-up volume in the first half-year,” Linsin says.

Take-up in the Top 5 locations and other markets (in square meters)

Source: CBRE Research, Q2 2016.

New record figure for take-up outside the top locations
Outside the top locations, the two million sq m threshold had been exceeded by mid-year 2016 for the second time since 2011. With a take-up of some 2.3 million sq m at the end of the first six months, a new record high that exceeded the year-earlier record by as much as one fifth had also been reached. The five-year average of around 1.7 million sq m was almost even doubled. Eight of the 15 largest deals involved owner occupations that together made up more than 410,000 sq m, including, among others, the extension of the MAN logistics centre by 60,000 sq m in Salzgitter in the context of relocating replacement parts logistics and the building of a 57,000 sq m logistics centre for DeLaval, a provider of dairy and farming equipment, in Gallin, Mecklenburg. All eight properties were new builds and serve to highlight the trend of companies toward more favourably priced land in sites outside the top locations.

All in all and not least due to Adam Opel GmbH’s new 95,000 sq m logistics building in Bochum as the largest deal so far this year, the Ruhr area, that accounted for 481,000 sq m, which represents more than one fifth of the entire take-up outside the top locations, reported very brisk activity. Next come the regions of Hanover (148,700 sq m), Cologne (95,400 sq m) and Stuttgart (80,700).

Automotive industry continues to dominate, as in 2015 – e-commerce largely in top logistics markets
The extremely good take-up through numerous lettings and owner occupations, both in the top logistics markets and in the other market areas, is not disproportionately attributable to one specific sector this year, but to strong demand from retail, production and transport/logistics. Logistics service providers contributed a share of around 31 percent to the entire take-up, followed by from retailers (30 percent), production companies (26 percent), as well as companies from other sectors (12 percent). “Along with DeLaval, companies from the automotive sector in particular, with transactions concluded by Opel, MAN, BMW and Audi, contributed to the high proportion. Moreover, it is conspicuous in the analysis of the user structure that, in the first half year, e-commerce companies have played more of a minor role outside the top locations, despite their growing importance in online trading and the associated adapting of logistics processes. Online traders concentrated on large conurbations in the first six months, as shown by a number of deals concluded generally in property developments, many of which in Berlin. This does not, however, signify a trend: In the second half of the year, we anticipate another increase in big boxes in the e-commerce business, primarily outside the Top 5,” Koepke comments.

Take-up 2016 highly likely to exceed the prior-year level
The sound foundations of Germany’s economy suggest further prospects of an economy that will develop well. The impact of the U.K.’s EU referendum, particularly on the German warehouse and logistics market, remains to be seen. “Business as usual is the motto at present,“ Koepke summarizes. “Following the extremely good half year, we expect to see the dynamic development continue in the next six months, which may result in another record year. We believe that, from today’s standpoint and given the well-filled pipeline of speculative property developments and a number of larger requests in the market for build-to-suits, a year-end result between six and 6.5 million sq m could be realistic,” Koepke predicts.

German logistics market: take-up (leasing and owner-occupied)

Source: CBRE Research, Q2 2016.

Contacts:
Rainer Koepke
CBRE GmbH
Head of Industrial & Logistics Germany
+49 (0)69 17 00 77 671
rainer.koepke@cbre.com

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