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 fourth 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 German logistics real estate market continues its success story in the third quarter of 2021: Now with a new high in take-up of space in the first nine months. The high demand for space is primarily explained by the continuing growth in e-commerce, but also by the increase in buffer stocks in view of ever new material shortages and delivery difficulties. These have led to an increased attention for the logistics industry in Germany.
Again, the yield for logistics properties have fallen across all age groups and property qualities. The prime yield for new buildings is now at 3.50 percent. Yields have also been fallen for existing buildings and properties in peripheral locations.
“Even the returns on properties built before 1990 are now approaching the 5 percent limit. But not every existing property is worth the prime yield. Given the high demand for logistics properties, sellers currently see themselves in a good negotiating position to negotiate high sales prices. However, there should still be a certain difference in yield between new buildings and existing properties. It is therefore even more important to pay close attention to the location and property quality”, says Bodo Hollung, partner and managing director of LIP Invest. The returns for both new and existing properties are expected to continue to fall slightly by the end of the year.
The transaction volume of 1.9 billion euros ensures a strong quarterly result on the German investment market for logistics real estate. With a total volume of 6.2 billion euros within the first nine months, the transaction volume is so far only slightly below the previous record from 2017. The proportion of single deals predominates; around two thirds of the volume is due to single transactions.
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 1.04 billion euros were offered to LIP in the third quarter of 2021. For the year end quarter, which is known to be strong, the forecast volume is again relatively high.
With a share of 60 percent, the logistics service provider user group clearly dominated the logistics properties on the market. On the contrary, industrial companies as users were hardly represented in the market with a share of 8 percent.
The level of new building activities accumulates in a volume of 3.8 million square meters for the first nine months. The third quarter accounted for 1.4 million square meters. In August, for example, the groundbreaking ceremony for a new DHL Freight centre in Erlensee near Frankfurt was celebrated. The 83,000 square meter logistics centre is intended to increase the capacity of the DHL Freight network in response to the increasing demand for logistics services.
Take-up of space
In the first three quarters of 2021, 5.8 million square meters were turned over – a new record! With 2.3 square meters the share of the third quarter is extremely high. As one observation, the growth is geographically distributed over numerous metropolitan areas. One of the important leases signed in the third quarter was the letting of the 20,000 square meter Panattoni logistics centre in Speyer to Hornbach Baumarkt AG.
LIP expects the high demand for space to continue till the end of the year and a strong response from investors.
The year 2020 changed consumer behaviour in Germany persistently. Instead of shopping in the supermarket or in retail stores, more and more people called upon the offers of online shops and delivery services. This gave e-commerce a boost to growth. At the same time, the E has been joined by a Q: The Quick Commerce. Several start-ups guarantee the delivery of groceries and drugstore items in under an hour. To keep these delivery promises, a comprehensive network of micro-hubs, small-scale warehouse near the city centre is required. The birth of a new asset class? This question is assessed very differently in the industry: Due to the small size and the sometimes mixed use of the areas, micro-hubs do not fall under the classic investment products of the logistics property asset class.