- Transaction volume further determined by individual deals
- Demand for space leads to a record six months
- Rents for new buildings are sometimes well below market levels
In addition to a review of the second quarter of 2021, the report “LIP UP TO DATE – logistics real estate Germany“Also an outlook on the development of the investment market for the third quarter of 2021. The market report contains figures and information on the transaction volume, the take-up of space and the volume of new buildings as well as the development of returns depending on the age of the building, location, property quality and lease term.
Market overview: logistics real estate in Germany
The logistics property asset class recorded a successful second quarter and secured second place among the most popular asset classes on the commercial property market in Germany. Both take-up of space and the volume of new buildings stand out with impressive results. The fact that the majority of speculative properties can be rented out before completion speaks for the high level of dynamism on the logistics property market. However, the increasingly scarce supply of suitable land is creating an increasing competitive situation among investors and project developers alike. The tenants of new buildings primarily benefit from this. These can partially negotiate rental prices that are well below the local rental level.
“In current tenders for new buildings, many project developers try to undercut each other. For the user who is the client of a new building, this is of course a good starting point for lease negotiations. The municipalities that allocate land can also take advantage of the high demand and set land prices higher. All of this is reflected in the increased purchase prices. However, the negotiated low rental prices for project developments ultimately offer potential rent increases when contracts expire, ”says Bodo Hollung, partner and managing director at LIP Invest.
LIP expects the high demand for space to continue in the course of the year and a strong response from investors.
The transaction volume closes the second quarter with a total of 2 billion euros, continuing the record results of the last few quarters. Exceeding the 7 billion mark for the full year 2021 thus seems certain. The majority of the volume is still due to individual transactions. Here, for example, Tchibo’s purchase of the 183,000 square meter logistics complex from BLG Logistics in the GVZ Bremen has an impact.
The prime gross yield for absolute TOP properties in prime locations with long leases fell to 3.70 percent in the second quarter. The returns have fallen across all age groups and property qualities. The run on the asset class with limited product availability at the same time is likely to lead to a continuation of the yield compression in the course of the second half of the year.
LIP constantly analyzes the developments on the German logistics real estate market. This includes, among other things, the observation of the supply situation. In the second quarter of 2021, LIP properties with a volume of around 985 million euros were offered for sale. This means a slight decrease compared to the previous quarter. More than 50 percent of the logistics properties available on the market were used by logistics service providers. The retail and industry user groups are almost on par in terms of the remaining shares.
New construction activity amounted to 1.4 million square meters in the second quarter, which is a strong boost to the half-year results in 2021. The industry has not yet been affected by the shortage of raw materials in the construction industry. In particular, the Münster / Osnabrück logistics region has seen a significant increase in new building dynamics with the start of construction of 90,000 square meters, spread over three logistics properties, in the Niedersachsenpark in Rieste.
Take-up of space
The demand for logistics space gives the take-up of space for the second quarter of 2021 a record result of 2.1 million square meters. This is a significant increase both compared to the previous quarter and compared to the same quarter of the previous year. So far, around 3.5 million square meters have been implemented in the first half of the year.
The clothing manufacturer s.Oliver, among others, made a significant contribution to the quarterly result. A 78,000 square meter central warehouse will be built for the fashion retailer in the Panattoni logistics park in Würzburg.
Logistics real estate in Germany – outlook
In future, LIP will use annual ESG reporting to report on activities in the areas of environment, social affairs and corporate governance. In our interface function between the logistics, real estate and investment market, we have a lot of room for maneuver to integrate sustainability measures.
“On the one hand, the report highlights the measures we have implemented at company, fund and property level in areas such as resource consumption or social commitment. On the other hand, the reporting shows which goals we have set for ourselves, including the further promotion of biodiversity and the expansion of photovoltaic systems, ”explains Natalie Weber, Head of Logistics & Research at LIP Invest.
Also read: Logistics property – Hornbach becomes a tenant in Panattoni Park Speyer.