* Gross initial yields rise for the first time since the economic crisis of 2008/2009
* Logistics real estate remains the second strongest asset class
* Supply routes via the New Silk Road are being re-sorted
LIP Invest, leading provider of special real estate funds in the asset class Logistics Real Estate Germany, publishes the latest developments in the increasingly popular logistics real estate asset class as part of its quarterly market report “LIP UP TO DATE – Logistikimmobilien Deutschland”. In addition to a review of the first quarter of 2022, the report also provides an outlook on the development of the investment market for the second quarter of 2022. The market report includes figures and information on the transaction volume, take-up of space and the volume of new buildings, the development of returns depending on the age of the building, location, property quality and lease term as well as on market developments and interest rates.
Market overview:
Logistics real estate strengthened its second place among the asset classes of the commercial real estate market in the first three months of the year. With a strong start on the investment market and continued high demand for space, the logistics property market continues to soar unabated.
Moreover, the Ukraine war has a noticeable impact on delivery routes. Trains via the New Silk Road had established themselves as an alternative to air and sea freight in recent years. On the routes through Russia, traffic has now fallen sharply. The southern corridor via Kazakhstan and Turkey is increasingly used as an alternative connection. Overall, further routes are being developed on the New Silk Road.
In the logistics real estate sector, the effects can be felt primarily regarding new buildings: “In the past, the sector benefited from well-calculable construction costs and predictable times. The stable prices could be passed on from the general contractor to the project developer and ultimately to the end investor. Due to the current situation, construction costs change very quickly and make planning difficult. General contractors are now increasingly agreeing escalator clauses and adjusting the conditions in line with the construction cost index. This partly means that rents for new buildings also being linked to the construction cost index,” explains Natalie Weber, Authorised Signatory and Head of Fund Management at LIP Invest.
Yields are on an upward trend for the first time since the economic crisis of 2008/2009: In the first quarter of 2022, gross initial yields recorded an increase up to 3.50%. The reason for this is a changed market environment due to profound increased interest rates and the Ukraine war. LIP Invest expects a slight upward trend over the course of the year, as the actual effects on the capital market side will only reach the real estate market with a certain delay.
Investment market:
With a transaction volume of 4.2 billion euros, the investment market started the year with a strong signal. The continued high turnover mark with individual deals speaks for the continuing great interest of investors in logistics real estate investments, even though portfolio transactions and company takeovers accounted for the majority of investments in the first quarter. This includes, for example, the takeover of the majority shares in VIB Vermögen with a volume of over 500 million euros.
LIP constantly analyses developments on the German logistics real estate market. This includes the regard of the supply situation. The start of a year tends to be somewhat quieter, so that LIP was offered properties with a volume of around 600 million euros for sale in the first quarter. Logistics service providers were again the predominant user group of the logistics properties available on the market.
Almost three quarters of the properties offered in the 1st quarter were new buildings. New construction activity remains high at 1.2 million square metres. The share of new buildings in the total take-up is around 60 percent and exceeds the same period last year by around 18 percent. In February, for example, construction started on the first three of ten planned logistics properties in the Louis Krages Logistics Park in Bremen. Project developer Mileway is planning more than 100,000 square metres of logistics space here.
Take-up:
The take-up of 2.0 million square metres is well above the long-term average. The letting of around 62,000 square metres to Airbus subsidiary Satair on the ground floor of the two-storey Four Parx logistics property “Mach 2” is one of the largest deals concluded in the first quarter. Considering the Ukraine war as well as ongoing delivery difficulties, the demand for logistics space will remain high for the rest of the year.
Outlook:
Can green roofs bind CO2 and thus make an effective contribution to climate protection? A research group from the Technical University of Braunschweig is investigating this question with an extensive measurement study on the 71,000 square metre roof of our logistics property in Obernburg. This offers new research opportunities for the scientific working group. The measurement study is initially designed for a period of one year so that seasonal fluctuations due to weather and vegetation cycles can be mapped. A positive result of the study would once again underline the importance of green roofs on logistics properties as an effective contribution to climate protection.
