LIP Invest with Logistics Real Estate Market Report for Q2/24

LIP Invest, a leading provider of real estate special funds for institutional investors in the asset class of logistics real estate in Germany, publishes its quarterly market report “LIP UP TO DATE – Logistics Real Estate Germany” detailing current developments in the highly sought-after asset class of logistics real estate.

(Munich) In addition to a review of the second quarter of 2024, the report also provides an outlook on the development of the investment market for the third quarter of 2024. The market report includes figures and information on transaction volume, space take-up and new construction volume, yield development depending on building age, location, property quality, and lease term, as well as interest and market developments.

Market Overview

For the first half of 2024, the transaction volume in the German investment market for logistics real estate climbed to nearly 3 billion euros. This is only slightly below the 10-year average. There are currently many offers available on the market, and the more stable interest rate development is positively affecting planning and gross initial yields.

“For investors, the current market environment with the high product offering presents a good opportunity to enter the market. Currently, everyone is waiting for falling interest rates, which is why not all transactions are being completed. Financing costs are also impacting transaction activity, as the financing margins of banks are currently quite varied,” says Bodo Hollung, partner and managing director of LIP Invest.

The space take-up remains at a stable level. The trend of users securing logistics properties and locations for the long term continues to increase. Price sensitivity is decreasing, leading to some transactions being observed at significantly higher levels. Additionally, the demand for suitable properties for battery storage is high.

Investment Market

The transaction volume in the second quarter amounts to 1.3 billion euros. In total, 2.9 billion euros were invested in German logistics real estate in the first half of 2024. There is again more activity on the supply side. Many project developers are bringing high-quality new builds to the market. The transaction closures continue to be characterized by foreign capital. For instance, the US investor KKR Real Estate has entered the German logistics real estate market with the purchase of a 48,600 square meter logistics property in Burgwedel near Hanover.

As expected, yields showed sideways movement in the second quarter. The prime yield for new builds remains between 4.85 and 5.20 percent. Hollung: “We expect a slight increase in purchase price factors at the earliest in the fourth quarter.”

LIP continuously analyzes developments in the German logistics real estate market. This includes monitoring the supply situation. In the second quarter of 2024, LIP was offered properties with a volume of 1.0 billion euros. The product offering has increased in recent months, providing good conditions for transaction activity in the upcoming quarter.

Space Take-Up

In the second quarter, a total of 1.3 million square meters of logistics space were rented or newly built. The space take-up for the first half of the year amounts to 2.5 million square meters. Nationwide, the rental market is moving at a subdued, albeit stable level compared to previous years. The demand for space is highly location-dependent. In the Berlin area, for example, many speculative construction projects have been realized due to the Tesla settlement, which are not yet rented, resulting in more vacancies there than in other regions. Among the rental activities is the leasing of 64,000 square meters by Lidl in Hückelhoven, west of Düsseldorf and Cologne.

New construction activity in the German logistics real estate market amounted to approximately 1.1 million square meters in the second quarter. This represents a slight increase in new construction activity compared to the previous quarter. In the first half of the year, a total of 2.1 million square meters of new logistics space were realized. In the logistics region of Leipzig/Halle, for example, the new construction dynamics are primarily shaped by the expansion of the VGP Logistics Park Leipzig-Airport by a total of 210,000 square meters. Since June, a 24,000 square meter new building has been under construction in the first phase.

Logistics Real Estate Soon with Hyperloop Connection?

The population of Germany will continue to grow, and with it, the flow of goods will also increase. According to a forecast from the Federal Ministry of Transport, freight traffic on the road is expected to increase by 54 percent by the year 2051. The KEP industry also anticipates an increase in package volume by 2028 in its latest study. How can these future passenger and freight transports be managed? Various research projects are addressing this question.

One of them is located at the Institute for Hyperloop Technology at Emden/Leer University: With the CargoTube, the university is working on a precursor to the Hyperloop. A magnetic propulsion system for freight transport through a tube with reduced air pressure is being used, unlike the Hyperloop system, which moves entirely in a vacuum. “So who knows – maybe the logistics properties of the future will need a Hyperloop connection,” concludes Hollung.

Download the study here