BNP Paribas Analysis Reports Boom in Logistics Space

BNP Paribas Real Estate’s analysis of the logistics real estate market shows a very strong demand at the beginning of the year, which continues unabated into the second quarter. With a space turnover of nearly 3.6 million m², not only was the previous year’s figure exceeded by nearly a third, but a new record for the first half of the year was also set. The previous best mark from 2011 was increased by around 7 %.

(Frankfurt/Main) “This new all-time high underscores that the logistics sector has coped with the Corona crisis better than most other economic sectors and will also benefit in the long term from structural adjustment processes. Notably, the rapidly growing importance of e-commerce and city logistics, as well as new requirements for production companies, are key factors. E-mobility, which also triggers additional space requirements, is just one prominent example,” explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH.

Major Logistics Regions Drive Revenue, but All Locations Benefit

It is encouraging that the major logistics regions (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig, Munich, Stuttgart) significantly contribute to the revenue jump. With over 1.58 million m², they have also set a record and exceeded the previous year’s result by an impressive 58 %. This is also due to the fact that in some markets, the supply has been somewhat expanded through speculative project developments. With the exception of Leipzig, where after last year’s record turnover of 187,000 m² (-10 %) the second-best result of all time was recorded, all locations were able to make noticeable gains. Leading the way are Frankfurt (333,000 m²; +44 %) and Hamburg (331,000 m²; +135 %), followed by Berlin (250,000 m²; +91 %). Cologne (148,000 m²; +202 %), Munich (138,000 m²; +30 %), Düsseldorf (111,000 m²; +59 %), and Stuttgart (85,000 m²; +31 %) also show significant increases.

Even outside the top locations, revenue has increased, albeit somewhat more moderately at nearly 17 %. The regions in the second tier, specifically the 12 logistics hubs that BNPPRE regularly analyzes in addition to the metropolitan areas, have particularly benefited from the rising demand. With 869,000 m², they were able to double their revenue within a year. The regions of Bremen, Münster/Osnabrück, and Kassel/Bad Hersfeld/Eisenach showed particularly dynamic growth. In contrast, the Ruhr area recorded a decline. After the second-best result of all time was registered there in the previous year, the current revenue of 190,000 m² is about a third lower.

Resorting to Existing Spaces Due to Short-Term Demand

Both the share of new construction spaces (just under 59 %) and the participation of owner-occupiers in space turnover (27 %) are below average. The slightly decreased share of new construction compared to previous years is partly due to the fact that a number of users with very short-term space needs were forced to resort to existing spaces of lower quality to take advantage of currently available business activities. The lower share of owner-occupiers is attributed to various trends: notably, the decreasing willingness to commit capital long-term (not least against the backdrop of noticeably rising construction and land costs), and on the other hand, the desire to respond more flexibly and quickly to accelerating trends in structural adjustments through shorter contract terms or location decisions.

Broad Demand Base

It is particularly encouraging that the significant revenue increase is based on a broad demand base and is not attributable to special developments in a few sectors. The noticeable economic rebound is reflected in the revenue share of logistics service providers, which, at just over 35 %, is roughly at their long-term level and has thus taken the lead. Retail companies come in just slightly behind at 34.5 %. Key drivers of the strong demand in retail are the continuing growth of e-commerce, the positive development of the food retail sector, and the increasingly important last-mile logistics. However, production companies are also significantly involved in the positive overall result with nearly 24 % and are expanding their capacities to tackle new requirements and challenges.

Rental Prices Increased in Several Markets

Since the logistics markets have hardly felt any negative effects from the Corona pandemic, it is not surprising that rental prices are generally rising. In several major logistics regions, prime rents have increased over the past twelve months. The strongest increase was recorded in Cologne with nearly 4 % to currently €5.80/m², followed by Munich with nearly 3 % to €7.20/m². However, rents also rose by around 2 % in Düsseldorf (€6.10/m²), Hamburg (€6.40/m²), and Leipzig (€4.60/m²). They remained stable in Berlin (€7.20/m²), Frankfurt (€7.00/m²), and Stuttgart (€7.00/m²). A similar trend was also observed in average rents.

Outlook

“In light of the increasingly improving framework conditions, both regarding the course of the pandemic and the economic recovery, a strong and generally still rising demand is also expected for the second half of the year. Therefore, the target mark for annual turnover is increasingly focusing on the 7 million m² threshold. Whether it can be exceeded for the second time after 2018 remains to be seen and will also depend on the further development of supply,” summarizes Bastian Hafner, Head of Logistics & Industrial Advisory at BNP Paribas Real Estate GmbH, the outlook.

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