As we report elsewhere in this issue, German logistics real estate is proving to be the rock of stability in an otherwise seriously disrupted marketplace, with several big new funds targeting the sector announcing their impending launches (See article: "German logistics still viewed as rock solid in turbulent times" )
One factor hampering the growth of the logistics sector, despite its relative attractiveness, is the serious shortage of sales-ready industrial sites across the country. A new study by IW Consult, a subsidiary of the Institut der deutschen Wirtschaft in Cologne (IW Köln), shows just how few sites are available for industrial development. Of the 120 local business development agencies contacted by the IW researchers in southern Germany, only 2.4% said they could provide any suitable land. In the northern and western parts of the country, no sites at all were on offer.
The prospects are much different in eastern Germany, where as many as 32% of the regional development agencies had sites for development, albeit on closer inspection many of those sites would have been impractical.
Still, the evidence is pointing strongly to the eastern states having the potential for much more development. A new study by developer Logivest shows that in the Dresden/Chemnitz region, construction starts of 190,000 sqm were recorded in the first half of this year, putting in overall third place behind top-placed Duisburg/Lower Rhine at 360,000 sqm and the Cologne Lowlands area at 197,000 sqm.
According to Logivest's CEO Kuno Neumeier, Dresden's performance along with Leipzig and Magdeburg further underpins the growing importance of the eastern states for logistics. The region's location in the centre of Europe, good connections and the availability of space at moderate prices is increasingly attracting international companies, finding themselves squeezed out of more established markets like Hamburg, Munich and Stuttgart.
Overall for Germany, and despite the ongoing heavy demand, Neumeier expects new project development to stagnate or even decline this year compared to last year, which saw total logistics space construction starts of 5.4m sqm.
Another factor likely to give a boost to logistics prospects in the eastern states is the generally much rosier outlook for industry in the region, which will bring with it its own demand for home-based local logistics facilities. Many eastern German cities and the clusters of industry that surround them are experiencing something of a boom. Even Berlin - long a laggard - has seen its GDP rise above the national average for the first time, and its surrounding state of Brandenburg has also been benefitting from the boost given by the arrival of the new Tesla electronic car factory at Grünheide.
With pressure on supply chains all around the world, many big industrial companies are on-shoring more of their production back in Europe, as part of the move to greater European "sovereignty" by increasing self-reliance on critical industrial sectors such as batteries and semiconductors, pharmaceuticals and the data cloud.
Giant chipmaker Intel is building two factories in Magdeburg in a €17bn investment, which are projected to create 10,000 jobs, while Canadian clean tech company, Rock Tech Lithium, is building Europe's first lithium converter in Guben, Brandenburg, about a 90-minute drive from the Tesla factory.
Guben, traditionally a textiles and coal-producing town before the collapse of communism, beat off about 60 other potential locations across Europe to clinch the €500m deal with Rock Tech. The factory will convert spodumene from Canada into pure lythium hydroxide, a key component in electric car batteries, and plans to produce 24,000 tonnes a year, enough for 500,000 cars.
Volkswagen has also converted two plants in Zwickau and Dresden into electric vehicle factories as part of the region's drive to put itself at the centre of Europe's electric car industry. VW plans to make 300,000 electric cars at the Zwickau site, which used to manufacture the Soviet-era Trabant. Other manufacturers such as cable-maker Leoni have set up near the VW plant, while BMW is building out its capacity in Leipzig to build battery modules and adding several hundred new jobs.
Other big companies building capacity in eastern Germany are BASF, whose factory in Schwarzheide will make cathode-active materials used in Lithium-ion batteries. Altech from Australia has set up a plant to produce anode materials in Schwarze Pumpe in Brandenburg, while Texan group Microvast and China's CATL are also building factories to make actual batteries, one in Ludwigsfelde south of Berlin and one in Erfurt.
Estonian supercapacitator start-up Skelet on Tech is building a site in Dresden, where it already works closely with the Technical University in the city and with the Fraunhofer Institute's science academies, many of which had previously been GDR facilities.
While the availability of space in the eastern regions is a key factor in attracting new inward investment, another competitive advantage is the plentiful supply of renewable energy - a crucial factor for the energy-intensive companies looking to set up there. Brandenburg tops the list of all German states in generating electricity from wind, solar and biomass per head, with renewable energy covering 94% of the state's electricity demand, as against Germany's national average of 46%.
Despite all the good news from the region, the east still has to face up to the reality that it's population is still scheduled to shrink even faster than that of western Germany, heightening the need to ensure enough workers by importing labour. A recent government report highlighted how 42% of working-age east Germans will retire in the next 15 years, a much higher rate than the national average. By 2032 there will be one person of pensionable age for every two of working age, says the report. That's a daunting challenge for local politicians.
