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Germany’s logistics property market is showing signs of life after a dismal year, but calling it a recovery feels generous. Transaction volumes in the first nine months of 2025 reached 3.9 to 4.4 million square metres, up 8 to 10 per cent year-on-year. That sounds encouraging until you remember they’re measured against 2024’s terrible baseline. Activity remains well below the long-term average, and the market’s defining characteristic is caution rather than conviction.
The improvement came in the second and third quarters after a weak start to the year. Logistics service providers drove roughly two-fifths of demand, with manufacturing and retail companies following. Asian e-commerce platforms added incremental activity, though large deals exceeding 100,000 square metres remained conspicuously rare.
Frankfurt, Berlin, Hamburg and Munich recorded double-digit growth rates, in some cases exceeding 50 per cent. Frankfurt led with 350,000 to 400,000 square metres transacted. The top markets collectively accounted for around 40 per cent of nationwide turnover. Cologne and Stuttgart, typically strong performers, slowed noticeably. Capital is concentrating in the few markets investors still trust rather than spreading evenly across the country. Momentum in leasing has returned, but it has not yet translated into meaningful rental growth.
Rents stall, vacancies edge higher
Prime rents rose modestly, up to 3 per cent year-on-year, barely keeping pace with inflation. Munich continues to lead at €10 to €10.70 per square metre monthly, followed by Frankfurt, Düsseldorf and Hamburg at €8.50 to €9. Dresden stands out as the genuine exception: rents jumped 3 per cent quarter-on-quarter to €6.50, with some deals reportedly hitting €7. “The logistics market in the Dresden region is currently characterised by space shortages and demand pressure,” said Sebastian Bögel, head of industrial and logistics at JLL Germany. The chip industry boom has created real scarcity.
Leipzig and Halle, by contrast, saw rents fall 3 per cent to €6 per square metre. The divergence between booming Dresden and declining Leipzig illustrates how uneven German logistics performance has become.
Garbe Research projects average European logistics rent growth of just 1.9 per cent annually through 2030, down sharply from 5.6 per cent achieved between 2020 and 2025. “The exceptional surge cannot be sustained indefinitely,” said Tobias Kassner, head of research at Garbe Industrial. Rental growth now lags the roughly 2 per cent inflation rate, meaning real returns are negative before costs.
Behind the subdued activity lies a structural mismatch. Users increasingly prefer three- to five-year leases, seeking flexibility in uncertain times, while core investors want longer commitments to justify prices set during higher-return years. Neither side is compromising, and deals are suffering. This does not resolve itself by waiting: either investors accept lower returns on shorter leases, or occupiers pay meaningful premiums for flexibility.
The big-box vacancy rate rose to 4.3 per cent, with only Munich (0.8 per cent) and Rhine-Main (0.9 per cent) remaining genuinely tight. The share of new buildings in total turnover fell to 48 to 63 per cent as speculative completions hit the market and demand shifted toward existing stock. Peripheral areas report abundant supply, while conurbations still face site scarcity. Across Europe, vacancy reached 6.6 per cent in the first quarter. Germany shows modest improvement, while the UK, Italy and Slovakia record sharper increases.
Investment activity and the defence wild card
Investment volumes of €3.5 to €4.4 billion in nine months represent a 5 to 17 per cent decline year-on-year and remain far below the ten-year average. What improved was the number of transactions rather than their value: smaller single-asset deals are closing, but large portfolio trades remain absent.
Investors cite declining rental growth and shorter lease terms as primary concerns. The economics that justified 2020 to 2022 pricing no longer apply, yet full repricing has not occurred. As one broker described the mood, it is “optimistic realism”. In effect, logistics has moved from a growth story to a yield-preservation play, forcing investors to recalibrate underwriting discipline.
Savills estimates that rising NATO commitments could create demand for up to 37 million square metres of additional logistics space across Europe, with 6 million in Germany. The German arms industry faces major procurement through 2029: new Eurofighters, Taurus modernisation, tanks, drones and air-defence systems all requiring production and logistics infrastructure.
The timing and certainty remain unclear. Government procurement moves slowly, and converting defence budgets into logistics leases involves multiple approval layers. “It remains to be seen how strong the growth impulses from the defence sector will be,” Bögel noted. Near-shoring and friend-shoring offer another potential tailwind, though more as a long-term structural shift than an immediate demand driver.
Outlook: stabilisation, not recovery
The full-year forecast of 5.2 to 5.5 million square metres would represent improvement, but nothing resembling historic performance. The sector is stabilising rather than recovering. Rental growth has largely stopped outside isolated markets such as Dresden and Munich, while vacancy is rising in secondary locations.
For institutional investors, Germany’s prime logistics markets retain pricing power through genuine scarcity. Returns will be lower than 2020 to 2022, and investors must accept shorter lease terms, reduced liquidity, or both. Secondary and peripheral markets face oversupply and require markedly higher returns to offset leasing risk.
REFIRE: Defence spending could eventually reshape demand, but betting portfolios on procurement timelines demands patience. The likelier scenario is continued stabilisation at current levels, with selective opportunities in markets where supply constraints remain binding. For now, logistics remains Germany’s most investable real estate segment: less exuberant, more disciplined, and increasingly shaped by industrial policy rather than consumer cycles. This is not 2020. Adjust expectations accordingly.