German Logistics Real Estate

Logistics is ‘flavour of the month’ for international investors in German real estate, the REFIRE 2013 conference in London was told by the chief executive officer of one of the leading providers.

Christopher Garbe, of Garbe Logistics, said that big international investors were teaming up to enter a market that had continued to grow during the banking crisis. But he warned they were paying really high prices to gain a foothold.

Germany had been developing new infrastructure hubs similar to London Gateway. But Jade Weser, the mammoth container port at Wilhelmshaven, was not yet a success story.

E-commerce, as one of the major drivers for the market, was changing the supply chain. He picked out Amazon and parcel delivery firms as heavy investors in distribution networks ‘to ensure that parcels are delivered within 24 hours’. As a result logistics was becoming ‘the new retail’.

Garbe said research showed people were 30% more likely to return parcels if they didn’t arrive after 24 to 48 hours. ‘That forces the parcel provider to ensure they are there on time. If he can’t do that, you are out of the market.’

New types of assets in response to these demands included cross-dock sheds where good are shifted from big trucks to smaller lorries for delivery to the doorstep. With zoning restrictions for environmental reason limiting the spaces where distribution sheds can be built, he saw land values rising.

The flight to core that has been bringing in international investors meant that in 2013 so far ‘we have seen €1.9 billion of transactions in the logistics market. Last year we saw only €1.7 billion in the full year. So there’s inherent interest in logistics.’

Prices were now back over the 2007 peak before the banking crash with international investors bidding over the odds.

Alfred Garbe (unrelated) of Hansteen Holdings, a UK real estate investment trust, said investors’ interests were moving from core to core plus and demand was up for light industrial and secondary logistics property as occupied by the mittelstand companies. Yields were now around 8.5 to 9%.

On drawbacks, Martin Belik of Cushman & Wakefield, a real estate services company, said there was a discrepancy between the increase in very short leases and longer bank loan periods.

Christopher Garbe said there was a need for generic sheds that could be used for other purposes. You had to be careful to pick the right quality and design.

It was, concluded Dr. Georg Foerstner of K&L Gates, who moderated the panel, a matter of location, location, location.