LIP Market Report Q2/21 “Logistics Real Estate Germany”

The logistics real estate expert LIP Invest publishes its market report “Logistics Real Estate Germany” for the second quarter of 2021. The transaction volume continues to be determined by individual deals. The demand for space leads to a record half-year. The rents for new buildings are partly significantly below the market level.

(Munich) LIP Invest, a leading investment manager for logistics real estate in Germany, publishes its quarterly market report “LIP UP TO DATE – Logistics Real Estate Germany” detailing current developments in the increasingly sought-after asset class of logistics real estate. In addition to a review of the second quarter of 2021, the report also provides an outlook on the development of the investment market for the third quarter of 2021. The market report includes figures and information on transaction volume, space turnover, new construction volume, and yield development depending on building age, location, property quality, and lease term.

Market Overview

The asset class logistics real estate recorded a successful second quarter and secured second place among the most sought-after asset classes in the commercial real estate market in Germany. Both space turnover and new construction volume stand out with remarkable results. The fact that the majority of speculative properties can be rented out even before completion speaks to the high dynamics in the logistics real estate market. However, the increasingly scarce supply of suitable plots is creating a growing competitive situation among investors and project developers alike. This primarily benefits the tenants of new buildings. They can sometimes negotiate rental prices that are significantly below the local rental level.
“In current new construction tenders, many project developers are trying to underbid each other. For the users as clients of a new building, this is of course a good starting point for lease negotiations. The municipalities allocating the spaces can also take advantage of the high demand and set land prices higher. All of this is reflected in the increased purchase prices. However, the negotiated low rental prices for project developments ultimately offer potential for rent increases when contracts expire,” says Bodo Hollung, partner and managing director at LIP Invest.
LIP expects a continuation of the high demand for space and strong investor response throughout the year.

Investment Market

The transaction volume concludes the second quarter with a total of 2 billion euros, thus continuing the record results of recent quarters. The surpassing of the 7 billion mark for the entire year 2021 seems certain. The majority of the volume continues to be attributed to individual transactions. For example, Tchibo’s acquisition of the 183,000 square meter logistics complex from BLG Logistics in the GVZ Bremen is notable.
The gross prime yield for absolute top properties in prime locations with long lease contracts has fallen to 3.70 percent in the second quarter. Yields have decreased across all age groups and property qualities. The rush for the asset class, combined with limited product availability, is expected to lead to a continuation of yield compression in the second half of the year.

Observation of the Supply Situation

LIP continuously analyzes developments in the German logistics real estate market. This includes monitoring the supply situation. In the second quarter of 2021, LIP offered properties with a volume of around 985 million euros for sale. Compared to the previous quarter, this represents a slight decline. More than 50 percent of the logistics real estate available on the market was utilized by logistics service providers. The user groups trade and industry are nearly equal in the remaining shares.
New construction activities amounted to 1.4 million square meters in the second quarter, significantly boosting the half-year result for 2021. The industry has not yet been affected by the raw material shortages in the construction sector. In particular, the logistics region of Münster/Osnabrück can report a significant increase in new construction dynamics with the start of construction of 90,000 square meters, spread over three logistics properties, in the Niedersachsenpark in Rieste.

Space Turnover

The demand for logistics space has resulted in a record space turnover of 2.1 million square meters for the second quarter of 2021. This is a significant increase compared to both the previous quarter and the same quarter last year. In the first half of the year, around 3.5 million square meters have been realized so far.
A significant contribution to the quarterly result comes from the clothing manufacturer s.Oliver. A 78,000 square meter central warehouse is set to be built for the fashion retailer in the Panattoni logistics park in Würzburg.

Outlook

With annual ESG reporting, LIP will in the future report on activities in the areas of environment, social issues, and corporate governance. In our interface function between logistics, real estate, and investment markets, we have a large scope of action to integrate sustainability measures.
“The report highlights our implemented measures at the corporate, fund, and property levels in areas such as resource consumption or social engagement. On the other hand, the reporting shows what goals we have set for ourselves, including further promoting biodiversity and expanding photovoltaic systems,” explains Natalie Weber, Head of Logistics & Research at LIP Invest.

Download Market Report here:

https://www.lip-invest.com/de/research-forschung#forschung available.
Photo: © LIP Invest