Logistics booming despite shortage of space

Transcription

1 Germany Market report Industrial & Logistics Real Estate Market H Logistics booming despite shortage of space Nicole Kinne Senior Consultant Research Industrial & Logistics Letting The current trend on the German industrial and logistics real estate market continues full speed ahead with Germany s seven main logistics hubs, Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart, recording combined total take-up (owner-occupiers and leases signed) of 1.3 million square meters at mid-year, an increase of 18% yoy. Take-up excluding owner-occupiers came to roughly 969,200 square meters (+14%), accounting for around three quarters of total take-up. The logistics market is bursting at the seams. Mega-trends such as the thriving e-commerce sector, the digital revolution and specialization on the part of certain industries is driving demand for industrial and logistics space to new heights. Suitable space is a rare find, particularly in prime locations, and occupiers from all sectors need to exercise patience in their search for the right property. On most markets we are especially seeing a shortage of available of space in as-new condition. Property developments, which could help boost supply, remain scarce due to a lack of development sites. Rhine-Main logistics region again takes the lead The Rhine-Main region again generated the highest takeup on the German logistics market, with owner-occupiers and tenants taking up around 322,400 square meters, basically matching previous year results (+2%). Demand in the region remains high. As in the previous year, companies from the transport and logistics sector (47%) and retailers (21%) were most active. Berlin Düsseldorf Take-up in the Top-7-Regions (in 1,000 m²) Development of the Top-7-Regions (y-o-y) Frankfurt/Rhine-Main Cologne Hamburg Munich Stuttgart Take-up Deals Prime Rent

2 The most significant leases signed in H include a lease signed for a logistics new-build encompassing 28,000 square meters in Panattoni Park Frankfurt Ost, located on the former Fliegerhorst site. Similar to activity in Berlin, deals involving more than 10,000 square meters set the pace in the Rhine-Main logistics region, accounting for 67% of total take-up. The Berlin/Brandenburg region also got off to a strong start this year, with several large-scale leases bringing in satisfying mid-year results of 226,600 square meters (+37%). Roughly 84% of total take-up was generated by leases signed for more than 10,000 square meters, including a deal signed for the second building phase of Log Plaza Brandenburg in Großbeeren, where a total of roughly 46,000 square meters is now being built for British online retailer ASOS. The online retailer also occupies the first building phase (completed in 2016) and will have access to a total of 92,000 square meters following completion of the second phase in early Demand among retail and e-commerce companies remains high with these sectors accounting for roughly three quarters of take-up. Logistics service providers trailed at some distance with 24%. Speculative developments such as Lilo-Park at GVZ-Berlin are expected to bring additional space to the market in H2. Just under 40,000 square meters is being developed at Lilo-Park with completion scheduled for the fall. Take-up by branch (Top-7, in %) Take-up by size (Top-7, in 1,000 m², Share of total take-up in %) Hamburg recorded a satisfactory take-up result at midyear of slightly below 225,000 square meters. Still, it was not enough to beat out H s results of roughly 254,900 square meters (-12%). The absence of suitable, large-scale development sites that could bring new space to the market was tangible here as well. Demand among transport and logistics companies for logistics space in Hamburg remains high (48%). With online retail continuing to boom, we can expect an increasing number of e- commerce companies to be on the lookout for space in the region in the next few years as it enjoys strong purchasing power. New space will most likely not hit the market until early Several new-build projects are currently under construction that could bring relief to businesses looking for space. 2

3 The Stuttgart industrial and logistics market recorded roughly 74,900 square meters in take-up in the first six months of the year. This reflects a yoy increase of around 19%, despite the ongoing drop in vacancy. Owneroccupiers continued to maintain a dominant presence in the Stuttgart region, accounting for more than 107,000 square meters and putting total take-up at roughly 182,600 square meters at the mid-year mark. The space segment of over 10,000 square meters pulled in the lion s share (113,000 square meters, 62%), the majority of which, however, was taken up by owner-occupiers with the exception of one lease signed. The current market trend continues to be effected by a shortage of industrial and logistics space available for immediate tenancy coupled with latent excess demand. Occupiers on the lookout for large-scale space currently have no choice but to turn to property developments in their early stages. Available stock space is also difficult to come by due to a strong owner-occupier presence in the Stuttgart region s logistics sector. The trend on the Cologne logistics market has been favorable this year to date. With around 160,300 square meters in take-up, the city even managed a close third following the Berlin/Brandenburg region, recording a 37% yoy increase in H Two property developments, each encompassing 22,000 square meters, played a significant role in these results. The developments were completed this year for paper wholesaler Papyrus and IT specialist Computacenter. Retailer Clic-Trade was one of the companies to snap up stock space (roughly 10,700 square meters) in the district of Cologne-Porz. Stock space remains a rarity in the region, leading an increasing number of companies to turn to the surrounding communities. Speculative developments, such as Alpha Industrial near Bergheim featuring around 13,000 square meters, are bringing new space to the market. It should not be too difficult for the market to top 2016 levels (199,400 square meters) as a result. As in the previous year, most leases were signed for midsized units of between 1,001 and 3,000 square meters. Almost half of the leases signed this year to date involved space in this segment, accounting for a combined 41,800 square meters or roughly one-third of total take-up. Demand was strongest from companies from the engineering and automotive sectors, with these companies proving more active than in the previous year and accounting for almost half of total space leased. Landlords were often able to re-lease space at stock properties with leases set to expire without any listing activities required. Flexibility and new property developments could provide much-needed additional space. Activity on the Düsseldorf logistics market was much more moderate, taking a hit of -47% yoy and once again generating results below the 100,000 square meter mark. The region only recorded around 47,500 square meters at mid-year, almost half of which was taken up by logistics service providers. The largest-scale lease this year to date was signed by US logistics service provider Expeditors for around 18,900 square meters of hall and office space at Segro Logistics Park Krefeld-Süd. The Krefeld submarket northwest of Düsseldorf accounted for just under twothirds of total take-up with the Düsseldorf municipal area coming in second. Roughly 28% of leases with an average of 1,600 square meters were signed within city limits. We may see some larger-scale leases signed in the second half of the year as several developments, including properties near the port, are currently being listed. Nevertheless, the market is lacking a certain degree of variety at the moment. A number of different occupier groups are actively looking for space in the Düsseldorf region with varying requirements in terms of property quality and location. Some landlords are having difficulty finding tenants as a result, despite the fact that demand remains high. The Munich logistics region also surpassed previous year results by around 16%. A lease signed in June by logistics service provider Rhenus for more than 40,000 square meters in Neufahrn to the north of Munich dominated market activity, contributing to a satisfactory take-up result of roughly 132,300 square meters. Only two leases crossed the 10,000 square meter threshold, however. 3

4 Prime rents stable Rents remained stable for the most part with prime rents in the top 7 regions averaging at 5.85 per square meter (+1%). The Munich logistics region remains the most expensive with prime rents currently at 6.85 per square meter for modern logistics space of more than 3,000 square meters. Slight increases in prime rents can be seen in the Stuttgart and the Rhine-Main regions at 6.30 (+2%) and 6.40 (+2%), respectively. Hamburg ( 5.80) and Düsseldorf ( 5.40) came in mid-field, followed by Cologne ( 5.20) and Berlin ( 5.00). Comparison of Prime Rents (in /m²) With a shortage of space on the markets, particularly new and modern space, tenants are turning to stock properties to meet their needs. Average rents are on the rise as a result, a trend that is especially strong in Bavarian state capital Munich where average rent jumped 0.30 yoy to a current 6.40 per square meter. Summary and Outlook: Germany s BIG 7 willing and able Despite limited vacancy in industrial and logistics properties in Germany s top 7 logistics hubs, H managed to record an increase in take up in part thanks to large-scale leases signed for more than 20,000 square meters. These markets would have seen even higher results if more lots had been available for speculative new-build activity. In technology regions such as Stuttgart and Munich, demand for a modern mix of halls in combination with office space is rising by research and development (R&D) companies. This could improve the chances of usage permits, as R&D can provide higher commercial tax revenues as well as higher number of jobs. This could be more attractive to Municipalities than purely logistics settlements. At the same time, e-commerce continues to drive demand in conurbations with high purchasing power. The logistics sector is currently in the midst of the last-mile trial phase. New property formats such as multi-story logistics centers and innovative delivery concepts are going to pose increasing challenges to the real estate market and characterize future trends. We will see the significance of small-scale space near the city, most of which can be found in stock properties, grow due to customer proximity, forcing average rents upwards. Comparison of Average Rents (in /m²) 4

5 Share of property types (H1 2017) Investment 2017 is proving to be the year for logistics assets. This asset class generated a transaction volume of roughly 5.4bn in the past six months. Not only does this markedly exceed H s result ( 2.1bn), it also tops total transaction volume for all of 2016 ( 4.6bn). This record volume gives industrial und logistics assets a significant share of 21% in the commercial real estate market for the first time with this asset class almost tying retail assets (22%). The German industrial and logistics real estate market is currently soaring. Never before have we seen such high investment volumes in this asset class as in the past six months. The unabated interest in logistics assets in combination with a growing scarcity of available assets in prime locations has resulted in fierce competition among investors and has led them to act fast when new investment opportunities arise. Apart from traditional single asset deals, investors in recent months have mainly shown interest in fullscale vehicle and portfolio acquisitions in to order to secure sought-after assets. Transaction volume of industrial & logistics properties (in m ) Portfolio deals behind record result The market recorded several industrial and logistics portfolio deals from January through June, which combined generated an extraordinary result on the logistics market. Several mega deals such as the acquisition of the entire Hansteen portfolio in the billion-euro range (more than 100 properties in Germany) and the sale of the entire Logicor logistics platform in Europe to a Chinese sovereign wealth fund for a total of 12.25bn in the first six months of the year were not only among the largest deals to change hands on the logistics real estate market but also on the German commercial real estate market as a whole. Another major deal in H was the sale of the Gramercy Property Europe fund logistics portfolio for approximately 1bn. Insurance company Axa acquired 40 European assets, 15 of which are located in Germany, via its investment vehicle, Axa Investment Managers Real Assets. Transaction volume by size category 5

6 Portfolio deals generated roughly 4.3bn in the first six months of the year, around 80% of total transaction volume. While in H single asset deals still dominated market activity and portfolio deals only accounted for 44% of total transaction volume, deals in the billion-euro range resulted in a significant increase in portfolio share. Share of international investors (in %) Purchasing large-volume portfolios is a highly attractive way to respond to ongoing global investment pressure and acquire a number of profitable assets in only one transaction, particularly for foreign investors. An increasing number of owners are now willing to dispose of their properties as the market currently promises high proceeds due to exceptionally strong demand for industrial and logistics assets. Approx. 3.8bn, or 70% of total transaction volume, was poured into the German market by foreign investors who also accounted for the lion s share of all portfolio transactions. We also saw an unusually high influx of Asian capital with the acquisition of the Logicor logistics platform by Chinese sovereign wealth fund China Investment Corporation (CIC), which accounted for almost 40% of total investment volume. German investors, however, continue to prefer single asset deals (around 856m, or 16%). Garbe Industrial Real Estate GmbH, for instance, acquired two properties for its logistics assets fund, Garbe Logistik Immobilien Fonds Plus (GLIF+). According to Garbe, both properties were acquired for a total of 52m. Open-ended real estate funds and special funds particularly active Due to CIC s acquisition of Blackstone subsidiary Logicor, open-ended real estate funds and special funds primarily dominated market activity, participating in deals with a volume of roughly 3.9bn and accounting for 72% of total transaction volume. Asset/fund managers trailed at some distance ( 843m, or 16%), followed by property developers and development companies with a low market share (2.5%). Asset/fund managers were also very active sell side, generating around 3.5bn in transaction volume during the past six months, or roughly 65% of total transaction volume. Transaction volume by buyer group (in m ) 6

7 Yield compression continues With competition still high, particularly in top investment markets such as Berlin, Düsseldorf, Hamburg and Munich, gross initial yields for latest generation logistics assets featuring state-of-the-art fitout and long lease terms continue to fall. Transaction volume by seller group (in m ) Whereas prime yields for core assets were still at 5.4% at the beginning of the year, transactions with a purchase price multiplier of higher than 20x are no longer a rarity on the German market. As a result, yields for logistics assets in top markets fell for the first time below the 5%-threshold and, at the turn of the half-year mark, are currently at 4.9%. Summary and Outlook If the total package is right and you add a strong-covenant tenant, there is definitely a price that investors, particularly foreign investors, are willing to pay. We have seen increasing demand for big-ticket products with an investment volume of more than 100m as investors look to address investment pressure. In light of the limited number of assets currently available combined with factors such as the rapidly growing e-commerce sector and Germany s high popularity as a safe investment haven, we can look for yield compression to continue. There are also some assets in the pipeline that will be traded for less. The trend toward blending logistics with retail functions will be a main force behind the upward trajectory we are seeing in the logistics sector. The industry is currently in a trial and error phase, especially now with online retail on the rise. New types of real estate, optimized logistics concepts and the digitization of retail logistics are going to continue to drive the market and will strengthen the importance of logistics in Germany. Development of the Gross Initial Yield (Mean value in %) 7

8 403 offices in 68 countries on 6 continents United States: 153 Canada: 29 Latin America: 24 Asia Pacific: 86 EMEA: billion In annual revenue 95 billion in transaction volume with more than 72,000 investment and leasing deals Author: Nicole Kinne Senior Consultant Research Industrial & Logistics T nicole.kinne@colliers.com Colliers International Deutschland GmbH Thurn- und-taxis-platz 6 D Frankfurt am Main Tel Million square meter under management 15,000 professionals worldwide About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 15,000 professionals operating from 403 offices in 68 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com, or follow us on and LinkedIn. To see the latest news on Colliers International in Germany follow colliers.de Copyright 2017 Colliers International Deutschland GmbH. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s) All rights reserved.