Germany sees sharp rise in demand for logistics assets

The demand for logistical properties in Germany has risen so strongly this year that the top yields in Germany’s seven major logistics hub fell in the second quarter from 6.85% to 6.71%. This seems like only a modest fall given the more than €1bn turned over in the sector in the first six months (up 43% according to CBRE, but by more than 60% according to Colliers), making up nearly 8% of the commercial property transaction volume in the period, compared to a mere 4% as recently as 2011.

BNP Paribas Real Estate puts the transaction volume even higher at €1.33bn, a rise of 56% on last year, and making it the second-best period ever in the sector in Germany, after the boom year of 2007.

Despite the disparity in the figures, most of the broker groups agree that with vacancy rates of less than 5%, the biggest problem facing investors is finding enough suitable assets, with particularly online sellers having difficulty finding assets with the right technical set-up.

Despite that, more than three-quarters of European property specialists expect rising demand for logistics and industrial assets across Germany over the coming two years, mainly due to the rise of e-commerce, and thus good opportunities for development, according to a study by broker CBRE.

In a new survey, it found that e-commerce is expected by 81% of European investors to boost demand for warehouse and logistics space. The rise of online retail has already fed through to more occupier demand across Europe, and some 40% of respondents see Germany as the country with the largest growth, reflecting its strong economy. This is followed by core central Europe - Poland, Czech Republic, and Slovakia. A fifth of those surveyed said quality of existing product is hindering investment, and see a need for developments to meet demand via technical specifications of modern e-commerce. Another detrimental factor is the practice of long-lease terms, though financing is seen as less of a problem.

CBRE also reported that Germany’s first-half logistics and industrial investment rose 43% to over €1bn, now taking an 8% share of overall CRE investment in the nation. Overseas investors, mainly from the UK, the US and Australia, made up 31% of buyer volume, while about 41% came from German Spezialfonds.

“As there are a number of larger portfolios on the market, we think the chances are good of reaching an investment volume of over €2bn by the end of the year,” said CBRE’s research head Jan Linsin.

Part of the attraction, said Linsin, is that logistics assets are ideally placed to diversify risk in multi-asset portfolios, with a current yield gap of 170bp-210bp to prime office and retail. Distribution hubs, such as the largest seven in Germany, remain in investor focus, taking up 65% of total investment volume.