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German logistics is producing an unusual combination of signals. Warehouse demand is strengthening, speculative development is returning and Chinese and defence-related occupiers are taking space that conventional market intelligence does not always capture. Yet higher interest rates are pushing yields outward again, with the greatest pressure falling outside the prime markets.
That tension emerged from JLL’s latest Industrial & Logistics briefing on 18th September. The occupational evidence was more encouraging than it has been for some time, but the investment conclusion was less comfortable: better leasing does not prevent lower prices when the spread over government bonds has become too narrow.
Germany’s second-quarter GDP grew by 0.3% from the previous quarter, while the consensus forecast for 2026 has risen to 1.1%. Against that improving background, Sebastian Boegel, who leads JLL’s German industrial and logistics leasing business, said warehouse take-up was returning towards normal levels. Rents remain well above their pre-pandemic level, while developers are once again prepared to build speculatively across the five largest logistics regions.
Part of the emerging demand is difficult to observe through the market’s usual channels. Chinese occupiers are moving unusually quickly; defence-related users often avoid publicity altogether.
Demand that arrives quickly or quietly
Boegel’s assessment of the first group was blunt: “Growth in Germany runs through Düsseldorf.” The city contains Germany’s largest Chinese community and is becoming the principal entry point for Chinese e-commerce companies, logistics providers and manufacturers.
JLL’s figures for the past 24 months place North Rhine-Westphalia clearly ahead of Hesse and Bavaria in leasing activity involving Chinese companies. Boegel expects expansion to spread into southern Germany as companies progress from warehousing and distribution towards activities closer to production. JLL is adding a native Chinese speaker in Düsseldorf to manage the pipeline directly.
Some occupiers are social-media-led retailers that initially served German customers directly from China. Establishing local inventories shortens delivery times and responds to growing customs friction. Automotive demand is also emerging as Chinese vehicles gain market share and require a German distribution network for replacement parts.
The operational detail matters for developers. Companies sometimes move from deciding upon a German expansion to wanting an occupied warehouse in fewer than eight weeks. That “new normal”, as Boegel called it, cannot wait for a conventional build-to-suit and strengthens the case for speculative buildings capable of immediate occupation.
Defence demand is less visible for a different reason. Boegel acknowledged that he had previously doubted whether higher European military expenditure would produce a meaningful rise in industrial take-up; the leasing figures have changed his mind. The activity extends beyond armoured vehicles into drones, cyber security and missile defence.
Boegel said a recent conversation with a senior Bundeswehr air-command officer confirmed that defence-related operations were being established beyond what appears in public reporting. Companies are reluctant to advertise facilities producing security-sensitive equipment because those buildings could themselves become targets. The resulting demand reaches leasing statistics eventually, but may not appear in broker announcements or press releases beforehand.
For investors relying upon published take-up pipelines, that creates an information lag. Chinese occupiers can appear too quickly to be captured far in advance; defence occupiers may become visible only after transactions have taken place.
Better leasing does not prevent repricing
Diana Schumann, JLL’s head of Industrial & Logistics Investment Germany, said the sector now accounts for approximately one euro in every six invested in German commercial property. Foreign investors continue adding to their German holdings, while some are shifting allocations from residential property into logistics because residential investments have become harder to finance at current interest rates.
Transaction volume reached approximately €3bn in H1 2026, with another €1.5bn possible in Q3 depending upon several larger portfolios currently in exclusivity. Portfolio transactions represented almost 40% of volume last year and increased significantly in both number and aggregate value during H1 2026. Schumann pointed to several transactions above €100m, including activity involving Frasers and Logicor, while further portfolios remain in exclusivity.
Liquidity, however, is not the same as readily available equity. Schumann said JLL is receiving more equity-advisory requests than ever, spanning platforms, individual assets and developments. Capital wants exposure to logistics, but sponsors are finding it harder to assemble the equity required to proceed.
Pricing is where improving occupational conditions collide with the capital markets. Prime net initial yields in Hamburg, Frankfurt and Munich stand at approximately 4.5%, leaving a spread of only around 150 basis points over the ten-year Bund. Schumann argued that this was insufficient over the longer term.
Ahead of JLL’s formal publication, she indicated that prime logistics yields were likely to move outward by around 10 basis points in those three markets. Other regional markets could move by approximately 20 basis points, while secondary yields may rise further still.
The distinction between prime and merely modern assets is consequently becoming more important. Schumann said assets in weaker locations, or without good covenants and long leases, were under appreciably greater pricing pressure, including for new buildings meeting current ESG standards. Sustainability credentials cannot indefinitely compensate for weaker location or income security.
REFIRE: Chinese occupiers moving unusually quickly and defence-related users avoiding publicity are doing real work in German industrial leasing before conventional market intelligence necessarily detects them. That helps explain why take-up is recovering and speculative construction is returning, but it does not protect values from higher financing costs.
Core assets may absorb a modest yield adjustment, supported by stable rents and stronger demand. Secondary properties face a harder calculation as investors demand a larger premium over government bonds and become less willing to treat new construction or ESG compliance as substitutes for location and covenant quality.
German logistics may be recovering operationally before it has finished repricing financially.