German logistics market surges, driven by e-commerce

German logistics take-up has continued where it left off last year, rising nearly 2% in this year's first quarter to 1.5 million sqm, a new record for any first quarter, according to BNP PRE. Early figures reaching REFIRE show a real estate segment still in growth mode, driven by e-commerce which is growing in Germany at more than 10% a year

Transaction volume on the German logistics and industrial property market hit a record €4.72bn in 2016, a rise of €620m over 2015, according to JLL. Figures from BNP Paribas Real Estate came in slightly lower, at €4.44bn, while other brokers had slightly varying figures, dependent on definition. All are agreed that peak yields in core and core-plus logistics properties will remain under pressure in 2017 due to shortage of product.

Investment statistics for the asset class logistics show steadily rising volumes since 2010, largely due to the rise in online selling and industrial outsourcing of manufacturing processes. Since 2010 the investment volume has risen 84%, albeit the share of volume by foreign investors at 37% last year has fallen by nearly 60% on average over the period, with slight shift to core-plus investing i.e. a greater willingness to take on more risk, and to commit to more forward funding deals, according to Willi Weis, head of industrial investment at JLL Germany.

After a hefty slide of 15 bps in 2015, top yields fell further by 26 bps by end-2016 to 5% in Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart, and 5.1% in Berlin. Leipzig still offers closer to 5.7%, according to BNPPRE.

The bubbly logistics market has led to several large transactions and fund announcements recently. Prominent among the new funds is a €300m German logistics fund launched by UK-based investment manager TH Real Estate, part of US pension manager TIAA. The fund, German Logistics Fund II (GLOF II) is TH Real Estate's fourth Spezialfonds for logistics, and is targeting €200m in equity. With €300m in firepower, the fund will bring TH Real Estate's German logistics holding to over 1 million sqm from its current 750,000 sqm.

GLOF II, for German institutional investors, is pursuing a Core-Satellite strategy, investing in existing and new buildings throughout Germany with core characteristics but pepped up with individual assets from neighbouring risk categories. The first asset, a 97,000 sqm development in Elsdorf, between Bremen and Hamburg, is a forward-funded deal to construct four state-of-the-art halls with maximume flexibility for division and multi-use. The asset has been fully-let to contract logistics provider Noerpel, which plans to use the complex as its main northern German distribution centre.

Likewise, German asset and fund manager RLI Investors has launched its second German logistics fund, backed by instituional investors. The RLI Logistics Fund-Germany II open-ended fund has already attracted an initial €100m on its first close and is targeting an annual 6.75% distribution yield. It expects to invest up to €400m in industrial, commercial and e-commerce logistics properties across Germany, both existing and developments via forward purchase and forward funding agreements.

Meanwhile, US-based investment manager Heitman bought five German logistics buildings for MEAG, the investment arm of Munich RE and ERGO insurance group. The assets, part of a logistics park in Worms, were acquired on behalf of MEAG’s European Logistics Fund. All the buildings are fully leased to logistics service provider Trans Service Team, which occupies 50,000 m2 of space in the park.

Heitman was awarded a mandate to invest in European logistics by MEAG in 2013, and this brings to 10 the number of properties Heitman has bought for MEAG in Germany and France. MEAG itself manages assets of around €265bn, of which about €10bn are held in real estate.

German logistics specialist Garbe Industrial Real Estate also bought two new properties for its Garbe Logistik ImmobilienFondsPlus (GLIF +) in Essen and Worms for around €52m. Sonja Ebeling, head of investment management at Garbe, said, "With the current acquisitions, the GLIF + now has a total of eight properties - and we are still looking for modern logistics facilities, also with short lease periods."

The asset in Essen is located in an urban area on the northern outskirts of the city and comprises 126,000 sqm of logistics including multi-storey warehouses. It is currently used as a large warehouse for fashion. Logivest advised Garbe on the deal, while Lohnbach Investment Partners, Munich, as the previous asset servicer of the property, advised the vendor. The second purchase, a fully leased modern logistics centre in Worms, covers 54,000 sqm and is equipped with more than 70 goods entry and exit gates. The seller was S+T Bundeszentrale Selex + Tania Handels.

The new leader in the rankings of Europe's top logistics developers is Panattoni Europe, which edged out previous leader Goodman Group and Prologis in the latest ranking produced by publisher PropertyEU. Panattoni leaprfogged its competitors by doubling its completed developments to 2.7m sqm between 2014 and 2016, after lasty year's volume of 1.1m sqm.

Three of Panattoni's largest developments were for Amazon, whose patronage of Goodman helped the Australian group to top the list for the past five years. Both Panatttoni and Goodman have seen volume surge in the past years thanks to the extra-large sheds required by retailing giant Amazon, while Prologis, the third-biggest player, tends to build smaller projects.

Poland heads the list of European countries with the highest volume of completed projects in the period (2014-2016) at 2.8m sqm, followed by Germany at just over 2m sqm. In projects under construction or in the pipeline, Poland also leads at 3.5m sqm while Germany has 2.4m sqm.