• At around € 2.3 billion, the total investment transaction volume of the top 7 cities came close to the previous year’s result, in 2018
• Yields decreasing further, rents rising
• The take-up of space was around 2.5 million m², and thus fell short of the very strong result of the year before, by 16 %

12 February 2019, Hamburg. Logistics and industrial properties continued to be highly sought after by investors and users in 2018, despite the fact that due to the supply shortage, there has been a year-on-year decrease of the transaction volume and the take-up of space. This situation is outlined in the industrial and logistics property market report issued by German Property Partners (GPP), the network of commercial real estate brokers. The investment transaction volume in Germany’s top industry and logistics regions Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich decreased by 5 % since the previous year. However, at a total of € 2.3 billion, the result was still strong, against the backdrop of the extraordinarily successful investment year of 2017. The investment turnover even increased in the logistics markets of Hamburg, Berlin, Düsseldorf, and especially Munich.

“Despite the fact that 2017 was characterised by the sale of a few unusually large portfolios, the 2018 transaction volume could almost match the previous year’s result, thanks to a number of package deals in the mid three-digit million range, as well as many individual transactions,” says GPP spokesman Guido Nabben. “Demand from investors is going to persist in 2019, in part because the European capital markets offer few equally good investment alternatives. A transaction volume in the billion euro range could be achieved in the top 7 markets once again this year, if suitable products become available.”

Owing to the strong investment pressure among investors, average prime yields decreased further in the top cities, from 4.58 % down to 4.28 %. The yield gap to office properties decreased further, from 132 to 124 base points. At 4.00 %, investors in Munich are currently accepting the lowest prime yields. The two biggest logistics facilities changed hands in Polheim-Garbenteich (Frankfurt region) with around 84,000 m² of usable space, and in Hoppegarten (Berlin region) with around 75,000 m². The activities of property developers were further boosted by high demand from final investors for new logistics properties. Combined with space requirements of owner-occupiers, this led to significant increases of purchasing prices for commercial land in many places. The highest prices in Cologne (+35 %), Hamburg (+25 %) and Berlin (+12 %) even increased in the two-digit range. GPP expects that this rising trend will continue in 2019.

Regarding the take-up of space, GPP registered high demand, in particular from logistics companies. Their take-up increased by around 11 %, making them the most important drivers of demand. This industry accounted for the biggest units taken up in all regions except Stuttgart. Compared to the year before, however, take-up of space decreased by around 16 %, to 2.5 million m² of warehouse space. Reasons for this include the general scarcity of available space, as well as a lower take-up of space in the retail, industry, production and crafts sectors. The share of owner-occupiers remained relatively stable at around 24 %.

Prime rents for industrial and logistics space increased in the German top 7 markets by between € 0.20/m²/month and € 0.60/m²/month in 2018. At € 7.00/m²/month and € 6.80/m²/month, the highest rents were registered in Munich and Stuttgart. The strongest price increases of prime rents occurred in Berlin (+12 %; € 5.60/m²/month) and Cologne (+10 %; € 5.50/m²/month), as well as in the region surrounding Hamburg (+11 %; € 4.70/m²/month). On the other hand, only few existing properties were available for rent, in particular in the centres of the logistics regions. Construction projects were taken up even without pre-letting in many places as a result.

“The letting market for logistics and industrial properties was characterised by high demand paired with scarce availability in 2018. The take-up of space is going to be limited by this in 2019,” says Nabben. “Despite the political risks for the export industry, there are certain early indicators of the world economy that have developed positively over the past few months, and the German economy is on an – albeit weakened – growth course. We therefore expect demand for space to be high and we predict there will be further rent increases over the next few months, at least in some locations.”