Are brownfields the new buzzword in development?
By Sara Seddon Kilbinger, Senior Reporter, REFIRE
How brownfields are being revitalised to meet demand for logistics and residential space
More and more developers are turning their eye to brownfield sites in Germany, due to their often central location, making revitalised sites ideally suited for last-mile supply, light manufacturing, showrooms and leisure uses.
In some areas such as North Rhine-Westphalia, there are a number of former industrial sites that are increasingly interesting for developers. Projects in cities such as Cologne and Dortmund show how brownfields are being revitalised for housing and logistics. As brownfield sites change use – from former power plants, abandoned landfills, condemned industrial buildings – developers are increasingly turning to them for new uses.
One developer getting in on the act in the region is Bonava, which is converting eight brownfields, including a car dealership and a former waterworks, into residential neighbourhoods. The projects are at different stages of development. Construction on the largest project, the Paulshöfen in Düsseldorf-Benrath, is expected to start this year. Around 500 rental and owner-occupied flats are being built on about 3 hectares, where Thyssen-Krupp used to produce.
Over in Cologne, Bonava is revitalising a rubbish dump in the Weidenpesch district. Remediation of the contaminated soil is expected to start this summer and will be closely monitored by the municipal environmental agency. The Quartier am Simonskaul project, as it is known, will include around 390 apartments, a youth centre and a public park. Municipal housing group GAG will assist with the residential component.
German logistics market sets new take-up record
Last year, the German industrial and logistics property market hit a new record with take-up of around 8.3 million sqm, an increase y-on-y of around 20% and a 40% increase on the average take-up over the past decade, highlighting what a popular asset class it has become, according to CBRE.
“2021 was an absolute record year in the German industrial and logistics real estate market,” said Rainer Koepke, head of Industrial & Logistics at CBRE in Germany. “At the beginning of the year, such a result hardly seemed conceivable due to the lack of space but users have triggered a great deal of momentum through their constant demand.”
Unsurprisingly, land prices have rocketed. According to a study by Bulwiengesa, land prices in the most important logistics regions in Germany increased by 28% between 2016 and 2021. As such, increased market competition requires would-be buyers to act with greater foresight in order to secure available space at an early stage, according to Nicolas Roy, head of Industrial & Logistics Germany at Colliers. The surplus demand for space - coupled with rising land prices and construction costs - drove up logistics rents in many regions last year. As a result, the average prime rent in the top five markets rose by 7.7% to more than €6.80 per sqm per month.
Other developers are also upping their exposure to brownfield sites, including logistics and business park developer, Segro. North Rhine-Westphalia is one of the most important locations for the company, which has around 760,000 sqm of lettable space there, much of it on former brownfields.
Demand continues to outstrip supply
However, take-up of space would be higher if more properties or sites came to market, according to Koepke: "Project developers have at least succeeded in bringing many new projects to the receptive market, often in brownfields,” he said.
Take-up in new buildings rose by 14% to 5.1 million sqm last year, representing around 62% of the total market. “It is becoming increasingly difficult for owner-occupiers to acquire new space,” Koepke said. “They are welcome by municipalities but there are hardly any greenfields left for owner-occupiers in the industrial estates. And in the case of brownfields, developers aiming at leasing usually prevail, not least because they are more willing to make higher bids and their decision-making is faster.”
Nonetheless, brownfield sites are not without challenges. Given their often close proximity to residential neighbourhoods, noise protection, the possibility of explosive ordnance and contamination have to be factored in, according to Inbright Development. If explosive material or contamination have to be dealt with, it can cost between €50 and €100 per sqm.