Industrial and Logistics Real Estate at Record Levels

According to the real estate consultant Colliers, the investment volume for industrial and logistics properties in the first nine months of 2021 shows a record result, with around 5.9 billion euros in investment volume. Logistics contributes with a double-digit market share (15 percent).Due to high demand, the gross yield continues to decline to 3.4 percent.

(Frankfurt/Main) In the first nine months, a record sum of 5.9 billion euros was invested in German industrial and logistics properties. According to Colliers, this is the second strongest result ever recorded at the end of a third quarter, following 2017. Compared to the previous year, the result was around 19 percent above the comparative value, and over a four-year average, an increase of 18 percent was generated.

Nicolas Roy, Head of Industrial & Logistics Germany at Colliers: “Market activity in the first nine months of the year was strongly influenced by demand from e-commerce companies. The changed purchasing behavior caused by the pandemic enabled many e-food providers and food delivery services to enter the market. The new market participants make the logistics real estate market more attractive for many investors. As a result, the asset class logistics achieved a significant market share of 15 percent and is currently one of the most interesting asset classes.”

European Investors Show Particularly High Activity

Due to the ongoing pandemic and travel restrictions, around 56 percent of the capital comes from national investors. This corresponds to the result from the first half of the year and shows that the interest of national investors remains very high. In the third quarter, Patrizia, in particular, has shown significant activity by acquiring a portfolio consisting of five DHL properties. Additionally, Catella successfully acquired four logistics properties for its special funds.

With around 44 percent of the total transaction volume, the share of international capital remains stable. Compared to pre-pandemic levels, the value is about 14 percentage points below the result from 2019 (58 percent). Notably, around two-thirds of the international capital comes from European investors. Among European investors, British investors have acquired a record number of nearly 40 logistics properties in Germany. Approximately two-thirds of British funds flowed into logistics properties outside the TOP 7 investment centers.

Share of Individual Purchases at Record Levels

Compared to the same period last year, the share of portfolio purchases remained stable at around 31 percent. The months of April to June saw the most portfolio transactions, with seven package sales. In the third quarter, only three large-volume portfolios were traded. Among others, Swiss Life Asset Managers purchased ten European logistics properties, six of which are in Germany, for a lower six-figure million amount. The properties were part of the Coldplay portfolio from 2019. Furthermore, Europa Capital sold eight logistics properties, including logistics properties that they had only purchased a year ago, to the Australian company Arrow Capital Partners. In the long-term comparison, the share of portfolio sales remains significantly below the pre-pandemic level of 2019, at 7 percentage points.

Among the most significant individual transactions in the third quarter was the acquisition of a logistics property in Großbeeren near Berlin. It was the largest single asset core deal of the year in the logistics sector in Berlin and also nationwide. In total, around two-thirds of all individual transactions in the third quarter were made by national investors, while the portfolios were predominantly sold to foreign investors.

Price Competition Intensifies

Due to high demand alongside limited supply, the situation in the market is becoming increasingly tense. The yield level for core logistics properties in prime locations with creditworthy tenants has further declined to 3.4 percent in the third quarter. This represents a decrease of 50 basis points compared to the same period last year. “Especially since the second half of 2020, yields have been in free fall. Since the fourth quarter of 2020, we have observed that, on average, yields are moving down by around 50 basis points from quarter to quarter. By mid-year, the first transactions were achieved with a purchase price factor of around 30 times, and we expect further similarly expensive transactions in the last quarter,” explains Roy.

Outlook

“The current market situation promises some attractive transactions in the fourth quarter. We expect that the annual result will exceed the record transaction volume from the previous year. Rising construction costs will continue to drive up purchase prices for project developments. The overall economic situation and pandemic-related travel restrictions will stabilize further as the year progresses. As a result, we expect more international buyers who will further increase the price competition,” Roy concludes.

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