TOP 7 INDUSTRIAL AND LOGISTICS PROPERTY MARKETS 2022: Rents for logistics properties rise appreciably despite faltering economy

Demand is outstripping supply, premium rents and cost of building land rising – “So far, the market for industrial and logistics properties has weathered stormy economic waters better than expected. Only a few years ago many investors saw this as the asset class which would suffer most in an economic downturn,” remarks Andreas Rehberg, spokesperson for the commercial property network German Property partners (GPP). “Now, however, with the economy facing several crises at once, crucial indicators in this sector of the market are looking good.” 

GPP 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 UP TO 34 %

“Despite the contracting economy, many factors are fuelling demand for logistics space in Germany’s top 7 cities: the steadily rising importance of e-mobility and online trade, the comeback of warehoused inventories due to supply chain disruptions, and a variety of industrial restructuring processes. The result is a permanent shortage of space in all top 7 cities,” explains Rehberg. Especially in and around Stuttgart and Düsseldorf there is huge demand for space. Although demand is more modest in Cologne, it is still greater than the supply. This situation puts lessors in an advantageous position.

As a result, premium rents had already risen appreciably by the middle of the year. In the 2nd half year this trend became more firmly established, both in city centres and in the surrounding districts. The cost of space within city limits rose most sharply in Cologne with a year on year increase of more than a third (+34 %) to €8.00/m²/month. Hamburg (+15 % to €7.50/m²/month) and Düsseldorf (+18 % to €7.30/m²/month) likewise posted percentage increases in the two-figure range. The premium rent for space within city limits is now higher than €7.00/m²/month in all top 7 cities. Currently, industrial firms and logistics companies face the highest rents in Munich, where up to € 8.60/m²/month can be charged. The biggest rise in premium rents for space in the environs was noted in Hamburg (+18 % to €6.50/m²/month). In the Stuttgart region the highest rental rate for space outside city limits was registered (€8.20/m²/month, +15 %).

PRIME YIELDS RISING ACROSS THE BOARD 

“This class of asset is popular with investors in view of rising rents and the tiny amount of space standing empty. Because borrowing costs are increasing, however, investors are more cautious and selective when choosing a property to buy. This makes the process of concluding a sale lengthier, and talks between seller and buyer regarding price are more challenging,” says Rehberg. Accordingly, prime yields started to grow in the 2nd half year. At the end of the year they average some 0.51 percentage points higher than 2021. The prime yield on logistics properties rose most steeply in Frankfurt, growing by 0.70 percentage points to 3.90 %. Düsseldorf saw a similar increase (+0.65 percentage points to 4.10 %). 

BUILDING LAND IS COSTLY 

Commercial building land remains a rare commodity and prices have thus risen considerably over the year. Land prices rose dramatically in Düsseldorf. Both inside the city and in the metropolitan area, land cost up to two thirds more year on year (+67 %). Buyers of land in and around Hamburg and in Berlin’s city and metropolitan area faced big increases of up to 25 % and up to 20 % respectively. Nevertheless, the Bavarian capital Munich and its greater metropolitan area still command the highest land prices.

OUTLOOK: RENTS CONTINUE HIGH, YIELDS RISE 

GPP estimates that in the coming months premium rents will remain high and could, in view of keen competition to obtain space in certain cities, rise further. Yields will, in GPP’s view, continue to grow in the initial months of the new year. Due to the shortage there is no sign of pressure on land prices easing. “Taking a realistic view of developments, the market for logistics and industrial properties would be affected by a prolonged downturn in the economy. But at the moment, there are positive signs which give cause for a degree of optimism regarding the year ahead. These include third-quarter economic growth that was slightly higher than expected, an improvement in the Ifo index of business confidence, the latest order-book figures for industrial goods and a small decline in the rate of inflation,” Rehberg comments.

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.