Berlin, September 5, 2018 – The logistics real estate market is booming, having followed a dynamic growth trajectory throughout Europe in recent years and experiencing a sustained upturn. Cushman & Wakefield Research & Insight forecasts average annual growth of 1.6 percent in prime rents in the European markets.
Germany is the most important market in Europe
Around 25 percent of total logistics sector turnover in Europe (1,050 billion euros) is generated in Germany. This, along with the country’s location and size, infrastructure quality and logistics technology, makes it the most important logistics market in Europe. This is also reflected in the demand for modern logistics and storage space. Take-up in Germany in the first half of 2018 reached a record level of 3.34 million square metres.
Stephan Haegele, Partner, Investment Advisory Industrial & Logistics, Capital Markets Group at Cushman & Wakefield: "Assuming the enduring strength of the economy and ongoing supply chain restructuring in the manufacturing and trade sectors, we expect take-up to exceed six million square metres by the end of the year."
Investors are also benefiting from the boom. With a transaction volume of around 3.1 billion euros nationwide, industrial and logistics real estate accounted for twelve percent of total commercial real estate investment to mid-2018, making it one of the three most popular asset classes.
"About 80 percent of investment is by foreign investors" Haegele continued. "Logistics is thus the most international sector in commercial real estate. However, due to ever-dwindling availability of product, the German logistics market is one of the most expensive in Europe, with prime yields at 4.5 percent. "
Online trading fuels growth
One of the strongest drivers of the logistics boom is the explosive growth in online trading, which has also led to a change in the image of the sector. Along with the internet and the traffic in cross-border goods, logistics and its space requirements are increasingly central topics.
Technological progress has also fundamentally changed the sector: innovations such as IT-based supply chain management and Industry 4.0 are optimising and digitising ever more processes and, with regard to transport and building areas, require highly networked and automated structures.
City logistics as a future-oriented segment with potential
City logistics is currently considered one of the segments with greatest future potential. In addition to large distribution centres, the demand for small, decentralised units for inner-city local supply is rising sharply. Nevertheless, city logistics poses particular challenges to the industry, due to concepts such as the "same hour delivery” or the high hygiene standards required for new areas to ensure compliance with cold chains.
Demand for new concepts
Because of the variety of new requirements, the market for city logistics is still at the pioneering stage. The lack of space availability in the inner-cities is the biggest single obstacle to growth. Particular opportunities are however afforded by the conversion of vacant multi-storey parking facilities, offices, commercial space and underground parking garages.
Haegele: "Overall, we rate the logistics property sector positively, in the light of its good performance indicators. However, the segment is very heterogeneous. The battle for the “last mile” is far from over and requires bespoke concepts and intelligent cooperation from landlords and developers."