Despite the gloomy economic environment, at least in the first half of this year the German investment market for logistics properties recorded a record transaction volume of €5.6 billion, up 43% on a year ago.
The year so far has also seen a number of firsts and innovations on the market, as well as the market entry into Germany of several well- known international investors.
Prior to this year’s first half, the best previous record was in 2017 with €5.56bn, while the ten-year average was more than doubled. According to Diana Schumann, Co-head of Industrial Investment at JLL Germany, “We’re expecting a transaction volume for the full year 2022 of €10bn, putting it at the level of last year.”
For the first half, the ten biggest deals accounted for about 45% of total investment - up three percentage points on last year. Four of the five largest transactions occurred in the first quarter, all of which were portfolio deals. These include the acquisition of Deutsche Industrie REIT by the Dutch company CTP and a portfolio of eleven properties and 260,000 sqm acquired by Prologis from UBS.
Schumann’s colleague Dominic Thoma, also Co-head of Industrial Investment at JLL, said that logistics assets remain firmly on investors’ shopping lists. “With the pandemic and at the latest with the start of the Ukraine war, the importance of self-sufficient supply chains and sufficient storage and production facilities in Germany has increased dramatically. This is also reflected in demand and prices.”
Growing online trade, but also the reorganisation of supply chains as well as so-called near-shoring and re-shoring has led to the rising demand for space, said Christopher Raabe, Head of Logistics & Industrial at BNP- PRE. “Many companies are now deciding to relocate operational production and storage capacities back to Germany, or even set up here for the first time, in order to reduce potential disruptions in the supply chain and provide more stability in their production process.”
The majority of investors in logistics and industrial properties in Germany came from abroad in H1, at almost 60%. In contrast, among sellers, Germans predominate, accounting for 72% of sales. This suggests heightened interest among foreign investors. “Overall, the balance of the real estate port- folio of foreign investors has grown by around €1.7 billion euros and underlines how interna- tional the asset class as well as supply chains are,” Schumann said.
Prime yields are being impacted by the uncertain economic situation and the sharp rise in financing costs. For the first time since 2009, yields might be nudging upwards on current offers. For example, prime yields in Berlin and Frankfurt are valued 15 basis points higher at now 3.1%. “However, we expect increasing pressure to act after the summer until the end of the year. If interest rates stabilise at a somewhat lower level, as well as a stronger consideration of inflation-related rent increases over several years, prices could also rise again,” Thoma said.
We’ve recently reported in REFIRE how eastern Germany was becoming increasingly popular for investment in logistics properties, with clusters such as Leipzig, Magdeburg and Dres- den particularly benefiting. The location in the centre of Europe, ideal connections and good availability of space at moderate prices boost the attractiveness of the region for international companies as well. In contrast, accord- ing to Logivest, restraint is already noticeable in other established markets such as Hamburg, Munich and Stuttgart. The start of construction on several projects has been postponed until next year, and new plans for the rest of the year probably won’t happen.
Logistics Roundup
In other logistics news, global investment manager AEW rolled out Germany’s first multi-storey logistics development. The 125,000 sqm Mach2 project in Hamburg offers Grade A sustainable logistics space over two buildings on three levels, including office and mezzanine areas. It is already fully pre- leased to tenants including Airbus, JYSK, Bechtle and Picnic.
The building is expecting to get a BREEAM ‘Excellent’ rating, and is equipped with a smart metering system and external energy monitoring, as well as solar PV panels, EV charging points, 220 bike parking spaces and green walls. It also features 100 loading stations with the option to extend, two ramps that lead to the upper floor with a load of up to 45 tonnes truck access, a warehouse clear height of 10 meters, and a car park underneath the first-floor truck yard.
The Czech-based pan-European logistics investor CTP is hugely beefing up its activities in Germany and plans to double its existing logistics holdings over the next five years, following its recent takeover of Deutsche Industrie REIT, now known as Deutsche Industrie Grundbesitz (DIG). DIG has a portfolio of 90 mainly ‘last-mile’ logistics properties located in key industrial and transport zones across Germany. It has made several new appointments to the senior management team to execute the expansion plan.
Another investor with big plans for Germany is Belgian group Warehouses de Pauw (WDP), which since July has been operating as the successor company to WVI GmbH from Ludwigsfelde near Berlin. German CEO Stephan Küper will spearhead the ‘strategic expansion’ of the listed WDP, which manages more than 6 million sqm of lettable space in Europe for its own portfolio.
Logistics giant Prologis bought a huge portfolio from Crossbay of 128 urban logistics properties throughout Europe, including Germany, for about €1.6bn. The deal was on behalf of its Prologis European Logistics Fund, and adds another 1.1 million sqm of urban space to its European portfolio. Prologis said the proximity to major city centres means that around 85% of these new properties could serve regions with a population of more than one million within 30 minutes. The space is 95% leased and adds more than 100 new clients to Prologis’ customer base. In Germany, the new properties are in Nuremberg and Berlin, a new market for Prologis.
Canadian group Ivanhoé Cambridge kicked off a new partnership in Germany with logistics specialist NVELOP, which it expects to reach a volume of €200m in its first phase. The partnership has just bought its first asset, a 72,000 sqm logistics development in Frankfurt.
Frankfurt-based ABG Real Estate Group, to date known more for its office investments, is also dipping its toe into the logistics market for the first time through its ABG Capital divi- sion. It’s tying up with Bensheim-based Dietz AG, and the partnership’s first deal is the Kerpen Logistics Centre near Cologne for a club of professional pension funds, for around €115m.
The brand-new Kerpen Logistics Centre has a lettable area of 60,000 sqm, with a DGNB ‘Gold’ certificate, six halls with flexible space option and high-quality offices in a separate building. ABG, headed by capital markets veteran Ulrich Höller, will hold the majority, while Dietz will be heavily involved in the asset management.
