LIP Invest, leading investment manager for Logistics Real Estate in Germany, publishes the latest developments in the increasingly popular logistics real estate asset class as part of its quarterly market report “LIP UP TO DATE – Logistikimmobilien Deutschland”.
In addition to a review of the second quarter of 2021, the report also provides an outlook on the development of the investment market for the third quarter of 2021. The market report includes figures and information on the transaction volume, 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.
The logistics real estate asset class recorded a successful second quarter and secured the second place among the most popular asset classes on the commercial real estate market in Germany. Both take-up of space and the volume of new buildings stand out with impressive results. The fact that a majority of speculative properties can be rented out before completion speaks for the high level of dynamic in the logistic property market.
However, the increasingly scarce supply of suitable land leads to an aggravation of the competitive situation among investors and project developers alike. The tenants of new buildings primarily benefit from this. They can partially negotiate rental prices that are well below the local rent level.
“In current tenders for new buildings, many project developers try to undercut each other. Naturally, this is a good initial point for lease negotiations for the user as ordering client of a new building. The municipalities that allocate land can also us the high demand for their advantage and set higher land prices. All of this is reflected in the increased purchase prices. However, the negotiated low rental prices for project developments ultimately offer rent increase potential when contracts expire”, says Bodo Hollung, partner and managing director of LIP Invest.
LIP expects the high demand for space to continue over 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 whole year 2021 thus seems certain. The majority of the volume is still due to single transactions. Here, Tchibo’s purchase of the 183,000 square meter logistics complex from BLG Logistics in the GVZ Bremen is to be mentioned.
The gross initial yield for TOP properties in prime locations with long leases decreased to 3.70 percent in the second quarter. The returns have fallen for all age groups and property qualities. The run on the asset class alongside limited product availability is likely to continue the yield compression during the second half of the year.
LIP constantly analyses the developments on the German logistics real estate market. This includes the regard of the supply situation. Properties with a volume of around 985 million euros were offered to LIP in the second quarter of 2021. This means a slight decrease compared to the previous quarter. More than 50 percent of the available logistics properties were used by logistics service providers. As to the remaining shares, the retail and industry user groups are almost on the same level.
The construction activities amounted to 1.4 million square meters in the second quarter, which is a strong boost to the half-year results of 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 due to the construction start of 90,000 square meters in the Niedersachsenpark in Rieste.
The demand for logistics space results for the second quarter of 2021 in a record take-up 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 turned in the first half of the year.
The clothing manufacturer s.Oliver, among others, takes up a significant share on the quarterly result. A 78,000 square meter distribution centre will be built for the fashion retailer in the Panattoni logistics park in Würzburg.
In the future, LIP will publish an annual ESG report to inform about the activities in the areas of environment, social and corporate governance. In our interface function between the logistics, real estate and investment market, we have a lot of opportunities to integrate sustainability measures.
“On the on hand, the report highlights the measures we have implemented on 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.