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Berlin Hyp Market Briefing: Let’s talk about light industrial!
The structural case for light industrial real estate begins with a simple observation about the global economy. "The era of just-in-time is definitively over," said Oliver Hecht, board member of Berlin Hyp, at a Berlin Hyp market briefing on the sector this week. The logic of sourcing globally and delivering precisely on demand has been broken by geopolitical disruption, energy shocks and the growing imperative to hold inventory closer to home. The consequence, in Hecht's view, makes light industrial "probably alongside residential the most interesting asset class for the next twelve months or more."
So what exactly is light industrial? Think of the workshop where a craftsman repairs motorcycles, the converted factory where a biotech startup runs its lab, the commercial courtyard where a digital agency shares a building with a food producer and a furniture maker. Units are typically small, often under 1,000 square metres. Tenants typically combine storage, light production, office and service functions under one roof. Buildings are frequently former industrial structures repurposed for the modern urban economy. In Germany, the Gewerbehof — a multi-tenant commercial courtyard — is the most distinctive expression of the format, and often the most dynamic.
Fewer headwinds than almost any other sector
Oliver Schlink, CEO of GSG Berlin and Germany's largest operator of Gewerbehöfe, offered the most pointed case for the asset class. Office real estate currently faces three structural challenges at once: economic weakness, the shift to homeworking and the creeping impact of artificial intelligence on white-collar employment. Light industrial faces only one of them. "There is no homeoffice for the craftsman manufacturing glasses," Schlink said. "That is a factory. It runs where it runs." AI, he added, will arrive later and with less force in a sector defined by physical work and small-scale production.
Sven Carstensen, CEO of bulwiengesa, backed this up with market data. Take-up in light industrial has remained remarkably stable compared with the volatility seen in office leasing — and in this case, flatness is a virtue rather than a weakness. Carstensen described the sector's performance curve as almost boring, but that is precisely the point. Tenant loyalty is high, vacancy is low and production and storage space remains structurally scarce. Rents have risen steadily. Investment volumes have fallen alongside the wider market, yet buyer demand remains intact and pricing multiples can exceed those achieved for well-performing office assets. In a property market increasingly defined by uncertainty, predictability has become a valuable characteristic in its own right.
The sector also has a counterintuitive characteristic worth understanding. Formal lease terms in Gewerbehöfe typically run three to five years. Yet Schlink's data shows his average tenant stays twelve years. Annual churn runs at roughly 8%, implying a de facto tenure far longer than the contract suggests. Tenants invest in their spaces, put down roots and stay. The courtyard format — often built around shared energy infrastructure, community events and reliable digital connectivity — reinforces that loyalty.
Underpinning the model is a degree of flexibility rarely found elsewhere in commercial real estate. Many of today's Gewerbehöfe have already lived several lives. Former factories become life science space. Industrial workshops become creative studios. Storage space becomes light production. The buildings are rarely optimised for a single occupier and are therefore unusually resilient when market conditions change. For investors, this alternative-use potential may be the sector's most important attribute. Demand shifts. Technologies evolve. Occupiers come and go. The building survives.
Demand from a broadening range of sectors
The tenant base spans craft trades, small-scale production, life science and technology businesses. Berlin benefits particularly from a dense research infrastructure, including six Fraunhofer institutes, nine Max Planck institutes and fifteen Leibniz centres, all of which generate a steady flow of spin-outs seeking flexible space. Schlink described tech as one of the strongest demand drivers in the city, with defence tech now an emerging component of that.
Hecht was more direct on the defence point: "I believe there is a massive demand coming from restoring Germany's defence capability. That is my personal conviction." Indeed, there is growing evidence that defence technology, drone development, R&D and light assembly are increasingly finding their way into commercial parks and Gewerbehöfe alongside more conventional occupiers.
Running through all of these sectors is a new and increasingly important requirement: power supply. Five years ago the question barely featured in leasing discussions. Today it is often one of the first. Asset managers are increasingly asking whether a building can support an incoming occupier's electricity requirements before discussing other specifications. The shift reflects broader economic trends extending far beyond light industrial. Automation, electrification, AI applications, laboratory space, advanced manufacturing and defence technology all require more power than the businesses they are replacing. In that environment, electricity capacity is becoming a competitive advantage.
The implications for real estate could be profound. Traditionally, investors evaluated industrial property through factors such as location, transport links and building specification. Increasingly, power availability is joining that list. A building with spare electrical capacity may prove more valuable than one with marginally better access to a motorway junction.
Berlin Hyp's relationship with light industrial has gone through its own evolution. Fifteen years ago the sector was difficult to finance. Then it became fashionable. Now, Schlink observed, only lenders who genuinely understand the product remain consistently engaged. Hecht's summary of what banks look for is straightforward: stable cashflows, alternative-use potential and a credible asset manager. "In this asset class," he said, "management quality correlates directly with security. If the management doesn't work, the security disappears."
For investors looking beyond the mainstream sectors, light industrial offers structural demand, genuine income stability and a model that rewards expertise. The barriers to entry are real. So are the returns for those who clear them.