BulwienGesa
Tobias Kassner - BulwienGesa
According to Kassner, “International investors accounted for the bulk of it. Their market entry has caused the sum total committed in "Unternehmensimmobilien“ portfolios to multiply. Accordingly, the record-breaking transaction volumes recently seen in the asset class of "Unternehmensimmobilien“ is closely linked to the intense market presence of international investors.”
A major new report on the German logistics market by market researcher BulwienGesa throws up a number of surprises, including several names that might not have figured on our own speculative list as to who are Germany's most active investors in the sector.
Ths study, based on a proprietary database of 1,205 new logistics buildings and 574 recorded transactions covering 19m sqm analyses the German logistics market for the five-year period 2010 to 2014. This includes assets under 5,000 sqm (which are frequently ignored in other studies), to give effective overage of about 26% of the whole German market.
A key finding is the emergence of the big retailers as key investors in the group. In terms of sqm of logistics property built over the period, the leader is Goodman with 1.26m sqm, followed by three retailers – Schwarz Gruppe (Lidl, Kaufland) with 657,000 sqm, Edeka with 388,000 sqm, and REWE with 366,000 sqm. In fifth place is automaker Volkswagen with 353,000 sqm. Among Goodman's clients are retailers Amazon and Zalando.
BulwienGesa's Tobias Kassner, the report's author, says his research team was surprised at the extent of new building by retailers, now at 25%. Another factor making it attractive for own-users to build their own logistics properties is the continued low level of interest rates, he said.
At nearly 75% owner-occupiership, Germany is far ahead of the USA and other markets, where the rate is more like 30%.
BulwienGesa expects the figure for 2015 to be 3.6m sqm, or about 5.5% less than in the record year of 2014 (3.8m sqm). Retail saturation and the lack of building space in numerous regions is being felt in the industry, which will have to lead to space recycling and more brownfield developments. These currently represent 20% of all new construction (even higher in the classical logistics regions of the Rhine and the Ruhr, where they can reach 80%), and are likely to increase.
The researchers point to another trend, that of smaller and more decentralised buildings of under 25,000 sqm. This sort of size is prime territory for project developers, making up about 40% of all new logistics construction, a percentage which is forecast to increase.
Another highlight is the proportion of foreigners investing in the segment, says BulwienGesa. About 40% of the market is now in the hands of the big developers Alpha Industrial, Goodman, IDI Gazeley, Panattoni Europe, Prologis and Segro. With new construction volume of 2.4m sqm these Big Six are well ahead of the nearest 14 German competitors at 2.0m sqm, and look as if they are going to extend their lead. Including all foreign investors, the foreign share of the market rose to 68% in 2014 from 27% in 2010.
Part of the reason for this, according to Kassner, is "the stronger degree of professionalisation in their Anglo-Saxon domestic markets." As a result, these groups had recognised earlier than others the increasing significance of Germany as a logistics location – while German developers showed little international ambition and were content to live with their regional networks, with some few exceptions such as Garbe Logistics.
Another factor viewed as important by the international investors is the re-saleability of their assets, increasingly insisting on certificates of sustainability. Barely 20% of all buildings completed before 2014 had these, and only 14% of new building land were certified with any form of "Green Label".
Financing
While the average financing requirements were €9.8m per property, some needed over €100m, particularly for larger warehouses or portfolios. Overall financing since 2010 is expected to reach €11.6bn by year-end. Mortgage banks and Landesbanken are the most active lenders in the field, responsible for 37% and 30% respectively.
In project development financing, Landesbanks are ahead of the mortgage banks, with a 33% share compared to 28%. These are followed by savings banks (Sparkassen) at 11% and co-operative banks (Volksbanken and Raifeisenbanken) at 7%, who traditionally have strong sector-specific local knowledge. Heading the overall list of lenders to the sector is the Frankfurt-based Helaba, followed by mortgage banks Berlin Hyp and pbb Deutsche Pfandbriefbank.
The BulwienGesa researchers note that the time it takes from the loan application to signing the contract normally ranges between six and eight weeks. The average loan-to-value is 65%, about 5%-15% below that of traditional office or retail assets due to the shorter life cycle of the asset. The maximum loan-to-value for ultra prime assets can go as high as 92%, the BulwienGesa team found.
Lettings
A new note issued this week by German group Realogis, which has carved out a 10% share of the German logistics letting market since its foundation in 2005, highlights how the lettings market has similarly more than doubled in the last 10 years.
According to Umut Ertan, the founder and main shareholder of the Munich-based group, "The total lettings market has more than doubled in the last 10 years, rising from 2.7 million sqm of logistics space in 2005 to an expected record take-up of 5.8 million sqm in 2015.”
“At present, the market is registering unbroken demand for spacious logistics properties larger than 100,000 sqm and more in size, as well as for smaller delivery centres close to customers with expansion options such as pick-up points,” said Ertan, commenting on the latest developments in the lettings markets.
Mezzanine areas also increasingly need to be available for small order processing and returns management. These are often not available in older warehouses or have to be built at considerable cost. Universal, flexible warehouses in central locations are therefore in demand. At the same time, site units that unite different types of warehouses such as fulfilment centres, cross-dock facilities, high-bay warehouses and temperature-controlled logistics spaces and cover all aspects of storage, commissioning and distribution will be of greater importance in the coming years.
“Warehouses in good locations are also becoming more significant again because online retail requires ever shorter distances to the end user. Fifteen years ago, central warehouse locations were still being torn down and converted into offices or housing. Today, there is a rapidly growing trend to preserve and modernise these sites, since rents have also risen significantly,” said Ertan.
