In view of the poor outlook concerning the overall economic situation, companies have become more restrained when it comes to their search for commercial space in the Cologne | Bonn region. Availability of industrial, storage and logistics properties continues to be too low, despite the decrease in demand; and rent prices are rising further as a result.

High energy prices, disrupted supply chains, rising interest rates, deteriorating consumer sentiment paired with high inflation: Germany’s economy is facing great challenges. It goes without saying that the troubled and unreliable market environment is also noticeable in the real estate industry. However, the effect is not quite as pronounced as in many other industries so far. In their latest market report, the property experts from Greif & Contzen are analysing the market situation for industrial, storage and logistics properties in the Cologne | Bonn region. Frank Klähn, Head of Industrial and Logistics Properties at Greif & Contzen Immobilienmakler GmbH sums up the findings as follows: “Demand for space has declined, requests have become more sustainable and qualified, rents are rising.” Expressed in figures, around 260,000 square metres of warehouse space were taken up in the first three quarters of 2022: just over 25,000 square metres less than in the same period last year.

The space shortage intensifies
While a decrease by 25,000 square metres is noticeable, it is far from a sharp drop. Especially seeing that this decrease is due mostly to a lack of availability, according to Greif & Contzen. The commercial property market of the Cologne | Bonn region continues to be characterised by a demand surplus, despite the fact that demanders tend to be acting a bit more cautiously. Frank Klähn explains that it is even the case that “availability of space has become noticeably scarcer in recent months, and the space shortage has in fact intensified”.

Strong negotiation position for landlords
Companies wishing to secure strategically important storage and logistics facilities are drawn to the region, regardless of the traffic infrastructure problems in the Cologne region in particular that keep hitting the headlines on a regular basis. The Cologne | Bonn region continues to be among Germany’s most important logistics hubs, and it plays a vital role for goods trading in western Europe. Premises in the surrounding region are very much in demand, owing to the fact that the city areas of Cologne and Bonn have long since reached their limits with regard to availability of space. However, space reserves are noticeably reduced on the periphery, too. “Those offering space are in a strong negotiating position,” says Frank Klähn to describe the market situation. In recent months, landlords have been taking advantage of this position to implement price increases. The demand surplus was not the only factor that caused prices to rise either: building material shortages and considerably higher construction costs are also being passed on to tenants through the rent. As a result, the prime rent in Cologne rose by about EUR 1.20 in the year to date to now EUR 7.20 per square metre. This corresponds to a greater increase than could be observed over the past five years combined (2016 to 2021: + EUR 0.95 per square metre).

Outlook: the space shortage persists
Companies looking for large-scale industrial, storage or logistics premises will have to be very patient, also in the months ahead. Vacant space in the region decreased markedly by around a quarter since autumn 2021, down to just over 55,000 square metres. Large available units are rare, and no noticeable improvement is to be expected any time soon. An impressive 150,000 square metres of warehouse space are scheduled for completion this year, however, virtually all of this new space is already let or intended for owner occupation. The trend of owner occupiers moving to the periphery due to the lack of land available in Cologne and Bonn continues. Land has started to become scarce here, too, though and the level of construction activity is far lower than what could be absorbed by the market. This means that the space shortage will continue and rents will remain stable at least in the coming months, despite the predicted economic downturn that is expected to dampen demand.