Further logistics rental growth forecast for Germany

After a record take-up for German logistics in 2015, a new report from UK research firm Capital Economics suggests that occupier demand in German urban areas is likely to hold up well again this year. This is despite a fall in Q1 of the logistics sentiment indicator from the influential Kiel Institute.

Around Frankfurt in the Rhine-Main area of Germany, logistics has recently surpassed finance as the largest provider of jobs, while the growth rate in the sector in Frankfurt has far outperformed other German cities. Since 2008, logistics employment in Frankfurt has risen by 16%, compared to a 12% rise in Berlin, 10% in Munich and 6% in Hamburg.

The researchers do point to a shift in sentiment in the sector, which is not entirely positive. The fall in the Kiel Institute's indicator, to its lowest level in three years, came from a drop in sentiment from logistics service providers. In contrast, industry and trade sentiment increased, point out the researchers.

Capital Economics argues in the report that the prospects for logistics occupier demand in the major cities is stronger than the headline indicators suggests, because demand depends to a greater extent on retail trade and final-mile delivery companies – both of which, in the Kiel Institute update, reported good levels of business activity and excellent prospects.

This increased need to be even closer to customers suggest to Capital Economics that rental growth will be sustained across Berlin, Frankfurt, Hamburg and Munich over the coming years. Their forecasts envisage average rental growth across the four cities being higher than the historical relationship between GDP growth and industrial rental growth might suggest. This however is partly due to the heavy weighting given to Berlin, which is seeing strong growth and where rents are now on the low side.

Concluding, Capital Economics forecasts average annual rental growth for 2016-2020 of 2.3% in Berlin, while Frankfurt, Hamburg and Munich will see growth rates of between 1.1% and 1.6%.