New Construction Volume in Logistics Real Estate Recovers Only Slowly

Approximately 2.1 million square meters of new construction volume – the German logistics real estate market is stabilizing only slowly in the first half of 2023, as shown by the research data from the consulting company Logivest, which specializes in logistics real estate and locations. The data is always based on the start date of construction.

(Munich) After the decline in new construction figures in the fourth quarter of 2022 to below 750,000 square meters, marking the lowest level in the last five years, the logistics real estate market in Germany recorded approximately 1 million square meters in each of the first two quarters of 2023.

The hesitant developments can primarily be attributed to the still rising interest rates and the current economic situation. While construction costs stabilize at a high level, energy costs remain extremely high. However, the outlook for the pipeline is positive, as it is well-filled. “The market has all options; many exciting projects are planned,” says Kuno Neumeier, CEO of the Logivest Group. However, according to Neumeier, very little speculative construction is currently taking place. “Last year did not leave the logistics real estate market unscathed. The demand for logistics space is almost unbroken, but due to economic uncertainty and rising costs, existing properties have gained relevance,” says the logistics real estate expert.

The reluctance regarding construction starts is particularly evident in established metropolitan areas. Cities like Hamburg and Berlin, as well as the logistics regions in North Rhine-Westphalia, are falling significantly short of expectations for the first half of the year. In contrast, the logistics region of Münster/Osnabrück surprises with the best result of the first six months. While only about 70,000 square meters were allocated to the area in the entire year of 2022, it can now impress with approximately 190,000 square meters. The logistics regions of Hanover and Bremen, which did not make it into the top 10 in 2022, have already surpassed their previous year’s results with approximately 170,000 and 145,000 square meters, respectively, in the first half of 2023.

Sustainability of Properties Stands Out

When looking at the top projects of the first half of the year, the sustainability of the properties stands out. All five largest project developments feature photovoltaic systems, focus on high energy efficiency, and aim for at least a DGNB Gold certification.

With around 127,000 square meters, the largest project development of the first half of the year is taking place in Estorf, Lower Saxony. BentallGreenOak and thirteen seven are developing the Mittelweser Park according to GEG-40 standards and the highest ecological criteria. The second and third largest projects, both developed by Garbe Industrial Real Estate, also focus on energy efficiency. Approximately 87,000 square meters are being developed in Ludwigsau, Hesse, and about 82,000 square meters in Pilsting, Lower Bavaria. The latter catapults the logistics region of Danube from rank 22 in 2022 into the top 5 logistics regions of the first half of 2023.

“The use of renewable energies is also an effective means to keep high energy prices and thus the massively increased ancillary costs as low as possible. Sustainability can and must also be economically viable, especially in the current times,” highlights Kuno Neumeier, pointing out another important aspect of the sustainability debate. He is convinced that this approach will continue to prevail and that there will be a new sustainability standard.

Stabilization is Emerging

Even though the logistics real estate market is not expected to reach the levels of previous years in 2023, a certain stabilization is emerging. The increasing relevance of seemingly new industries, such as the semiconductor industry, the emergence of new sustainable production sites, and the further establishment of buffer storage facilities are sending positive signals, as is the well-filled project pipeline.

Photo: © Loginfo24

Graphic: © Logivest