TOP 7 INDUSTRIAL AND LOGISTICS PROPERTY MARKETS 1ST HALF OF 2023: Short supply leading to steadily rising rentals for logistics premises

In the first half of 2023 the challenging economic environment caused shrinking demand for industrial and logistics properties in Germany’s top 7 cities. However, in Hamburg demand remains at a good level. “Although the German economy has entered a recessionary phase there is still a shortage of industrial and logistics space in all seven major cities”, reports Andreas Rehberg, spokesperson for the commercial property network German Property Partners (GPP).

GPP’s member firms – Anteon Immobilien, E & G Real Estate, GREIF & CONTZEN Immobilien and Grossmann & Berger – have compiled fact sheets that provide an overview of how premium rent rates, land prices and prime yields have developed in Germany’s top 7 locations.

PREMIUM RENTS rise by as much as 18 %

In 2023 a lack of available space in combination with higher construction costs has led to the continuation of a trend already noted last year, namely the rise of premium rents in the top 7 cities as well as in their surrounding communities. Cologne posted the strongest year-on-year rise of any area within city limits (+18 % to €8.50/m²/month). GPP noted a similarly large increase in Hamburg (+16 % to €8.00/m²/month) and Berlin (+13 % to €8.70/m²/month). The highest rents were paid in Munich (€9.00/m²/month). 

Looking at the cities’ environs reveals the steepest rise in rents in the Stuttgart region (+23 % to €8.50/m²/month). A similarly large rise was posted in the environs of Cologne (+18 % to €6.50/m²/month) and Düsseldorf (+14 % to €6.60/m²/month). The highest rent paid by industrial and logistics firms for premises in the environs of a city was €8.50/m²/month, a rate charged in the Stuttgart area.

BUILDING LAND PRICES stagnant but high

Following several years of growth and even price surges, the cost of commercial land remained high but practically unchanged in most of the top 7 cities. As in the past, the highest-priced building land for logistics development was in and around Munich. There is little scope for new-builds, thus exacerbating the shortage. More difficult borrowing terms and an environment less conducive to selling are reasons why some building projects have been put on the back burner.

Prime yields: GROWTH IN ALL LOCATIONS 

“So far in 2023 we have seen a sluggish market in the top 7 cities and note that, overall, few properties, including industrial and logistics buildings, are being sold”, says Rehberg. “In view of further interest rate increases and an ongoing phase of price discovery, investors are reticent and more selective when considering whether to sell or buy a new property.” 

In the first half of 2023 prime yields continued to rise and came close to the levels seen in 2018 and 2017. On average they are some 0.40 percentage points higher than at the end of 2022. In the top 7 cities the mean value is 4.30 %. Prime yields on logistics properties grew most in Berlin, where the figure rose against the close of 2022 to 4.20 % (plus 0.60 percentage points). 

Forecast: Increasing investment activity

GPP’s estimate is that the pace of transactions should become brisker during the course of the year provided that stable interest rates permit businesses to plan with greater certainty. “Industrial and logistics properties are still assets offering a lot of potential”, Rehberg remarks. “Trends such as holding larger inventories to cope with disrupted supply chains, relocating production plant back to Germany and online shopping, for which continued growth is assumed, combine to increase demand for modern logistics space. The energy turnaround, digitalization and the growing importance of electric vehicles are also driving industrial restructuring processes. Logistics properties benefit from these developments more than most.” 

 You may download the Fact Sheet on the top 7 industrial and logistics real estate markets i.e. Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich, from our website.