New records for investment and leasing in German logistics

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.

JLL expects many larger portfolios or platforms to be seeking an exit in 2017, while corporates could be looking to take advantage of the buoyant market to dispose of company-owned assets in sale-and-leaseback deals, according to JLL's Willi Weis. Overall the property adviser expects similar investment volume this year as last, with a strong possibility of further yield compression, pushing yields below 5%.

In leasing activity, CBRE registered rentals and owner-occupier deals for more than 6.7 million sqm of logistics space in Germany in 2016, a rise over the previous year of 11%, and a new record.

The owner-occupier rate of 39 % was six percentage points higher than in 2015 and the new building share increased by ten percentage points to 72 %. Rainer Koepke, Head of Industrial & Logistics at CBRE, said in a note, "We have noticed that owner-occupiers almost exclusively commit to development projects as they rarely find appropriate empty existing properties."  Take-up at the top five locations fell by almost 3 % to about 1.7 million sqm, which CBRE attributes to the absence of large-scale owner-occupier transactions.

Separately, a notable logistics deal at the end of last year has since been approved by EU regulators, making it one of the largest European real estate transactions of 2016. Singapore’s sovereign wealth fund GIC completed its €2.4bn acquisition of P3, the pan-European owner, developer and manager of logistics properties, from TPG Real Estate and Ivanhoé Cambridge.

P3 agreed a €1.4bn long-term refinancing package in October 2016, and now plans to bring forward the development of an existing land bank representing up to 1.4 million sqm of further development. Further site acquisitions in its nine current European markets, plus the entry into new territories, are also in the pipeline.

Ian Worboys, CEO of P3 commented, “We have expanded significantly across our core territories in recent years to become one of Europe’s largest fully integrated logistics investor-developers… GIC’s long-term investment strategy is closely aligned to our own approach and it has confirmed its support for us continuing as logistic property specialists with a strong customer service focus, a long-term logistics property owner (which has never sold a property) and a developer of the highest quality, environmentally sustainable assets.”