Record take-up on the German logistics property market
- Nationwide take-up totals 3.4 million sq m in the first half-year
- Lettings drive the market with new developments outside the Top 5 locations
- More large-scale deals over 50,000 sq m in the supraregional logistics markets
The first half-year on the German warehouse and logistics property market proved to be the strongest since records began. Take-up stood at 3.4 million sq m, outperforming the previous year’s result by 17 percent. This is the conclusion drawn in a current analysis prepared by the global commercial real estate services company CBRE.
The robust condition of Germany’s economy continues to drive demand on the logistics property market. Supply shortage above all acts as a factor of constraint in many places. The existing speculative developments in the popular locations are no more than a drop in the ocean. The availability of employees is also a factor increasingly determining the search for a location and is having a braking effect on take-up.
While the mid-sized segment from 5,000 to 10,000 sq m saw a similarly high number of deals, eight deals were signed in the size category upward of 50,000 sq m, which is six more than in the previous year.
Lettings drive take up
“The take-up growth registered in the first half-year was mainly attributable to lettings. By contrast, owner occupier activities were similar to the first half of 2017,” Herrenschneider adds. Owner-occupier take-up edged up by two percent to 1.2 million sq m – the letting rate therefore increased by 26 percent to 2.2 million sq m. Take-up in new supply rose by 17 percent to 2.4 million sq m – take-up in existing stock therefore came in at approximately one million sq m (up 15 percent).
Supply shortage curtails take-up in the Top 5 markets
As sharp as take-up was across German, the decline in the Top 5 markets was just as pronounced. In comparison with the year-earlier period, just under 870,000 sq m were signed, reflecting a downturn of 17 percent. This decline was due to local supply shortage as there is virtually no vacant existing stock or suitable land available in the Top 5 cities. The share of new builds in the Top 5 locations dropped by 13 percentage points to 39 percent in a year-on-year comparison, settling at 340,000 sq m.
The downturn in take-up in the Top 5 markets is explained by Berlin and Munich in particular that reported 134,000 sq m (down 50 percent) and 99,000 sq m (down 24 percent) respectively due to the failure of large-scale transactions to materialize. Take-up in Frankfurt fell by a more moderate 10 percent to 302,000 sq m. By contrast, Hamburg and Düsseldorf registered growth to 245,000 sq m (up three percent) and 91,000 sq m (up 14 percent).
Take-up in the Top 5 locations and other markets (in sq m)
*Deals above 5,000 sq m
Source: CBRE Research, Q2 2018.
Take-up dominated by locations outside the Top 5
Take-up outside the established markets of Berlin, Düsseldorf, Frankfurt/Rhine-Main, Hamburg and Munich rose to 2.6 million sq m (up 35 percent compared with the first half of 2017), with take-up in project developments climbing 38 percent to 2.1 million sq m and owner-occupier take-up by 12 percent to 1.1 million sq m. Take-up declines, however, were registered in many other traditional logistics markets, in the Ruhr Region for instance (down 19 percent). By contrast, take-up in decentralized locations outside the 23 logistics markets monitored by CBRE was seen to almost double in comparison with the first half of 2017 to currently 1.3 million sq m. Particularly in the regions of North Rhine-Westphalia that is not allocable to any of the four clusters, a significant increase in take-up to 456,000 sq m was registered. This was attributable to two lettings, each of more than 100,000 sq m, to international forwarder Hammer and an American online retailer.
Tailwind for rents
Owing to the short supply, prime rents in the Top 5 locations has climbed by an average of between two and three percent in the last 12 months. In Düsseldorf, nominal prime rent for contemporary warehouse and logistics properties in established locations rose by almost two percent to €5.50 per sq m and month. Another increase in rental prices of just under three percent was observed in Munich. At €7.00 per sq m and month, the highest prime rents in Germany were commanded here. The second most expensive logistics market was Frankfurt/Rhine-Main at €6.40 per sq m and month, reflecting an increase of 3.2 percent compared with the first six months of 2017. The development of the Berlin logistics property market proved to be similar: with a prime rent of €4.80 per sq m and months (up 3.2 percent), Berlin is bringing up the rear of the Top 5 markets and offers upside potential for further increases.
“In view of the short supply in the desirable conurbations, rental increases will be unavoidable, particularly when space is sought at short notice. Users with a longer planning horizon can benefit from the still low yields in the investment markets that may especially be reflected by rents below the market level with developments tenders for new builds,” Koepke says.
Good full-year result anticipated, depending on political developments
“With the lack of land and existing space, compounded by longer implementation times due to tight building capacities, demand momentum is unable to translate into deals in every case,” Koepke explains. “For the full year, however, a good result above the year-earlier level of between 6.5 and 7.0 million sq m can be anticipated. The year-end result will depend on a possible dampening of the economy in the wake of protectionist trade policies, Brexit expectations and consequently more cautious decisions. The booming e-commerce will, however, continue to drive the demand for logistics space of any size,” Koepke predicts.
German logistics market: take-up (leasing and owner-occupied)
Source: CBRE Research, Q2 2018.
Selected take-up in H1 2018
Source: CBRE Research, Q2 2018.
Head of Industrial & Logistics Germany
+49 (0)69 17 00 77 671
Co-Head of Industrial & Logistics Germany
+49 69 17 00 77 43
Associate Director Research
+49 69 17 00 77 150
More information on CBRE:
CBRE Group, Inc. (NYSE:CBRE), 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 2017 revenue). The company has more than 80,000 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. www.cbre.de