LIP Invest, a prominent provider of special real estate funds in the Logistics Real Estate Germany asset class, has released its latest quarterly market report, “LIP UP TO DATE – Logistikimmobilien Deutschland,” covering developments in the second quarter of 2024. The report, which includes data on transaction volumes, space take-up, new building activity, and market trends, also offers insights into the anticipated market conditions for the third quarter of 2024.
The German logistics real estate market saw transaction volumes nearing the €3 billion mark in the first half of 2024, approaching the 10-year average. A stable interest rate trend has contributed to more predictable yields and a resurgence in market activity, with a wide range of properties currently available. Despite this, many market participants are awaiting potential interest rate reductions before committing to transactions. Financing costs are also playing a significant role in the current market dynamics, with varying margins offered by banks influencing transaction activity.
LIP Invest’s Partner and Managing Director, Bodo Hollung, noted that the current market offers investors a prime opportunity to enter, thanks to the abundant supply of high-quality properties. However, he also acknowledged that ongoing uncertainties around interest rates are causing some hesitation among buyers.
In the second quarter of 2024, the transaction volume reached €1.3 billion, contributing to a total of €2.9 billion invested in German logistics properties during the first half of the year. Foreign investors, particularly from the United States, have continued to dominate the market, with notable transactions such as KKR Real Estate’s acquisition of a 48,600-square-meter logistics property near Hanover.
Yields remained steady in Q2, with prime yields for new buildings holding between 4.85% and 5.20%. Hollung anticipates that purchase price factors may begin to rise slightly by the fourth quarter of this year. LIP’s ongoing market analysis reveals an increase in the supply of properties, with €1.0 billion worth of logistics real estate offered to LIP in the second quarter, signaling favorable conditions for increased transaction activity in the coming months.
The logistics space take-up in Q2 2024 totaled 1.3 million square meters, bringing the first-half figure to 2.5 million square meters. While overall demand remains stable, it varies significantly by region. For instance, Berlin is experiencing higher vacancy rates due to speculative construction projects, while other areas, like Hückelhoven near Düsseldorf and Cologne, have seen significant leasing activity, including Lidl’s rental of 64,000 square meters.
New construction in the logistics sector also saw a slight uptick, with 1.1 million square meters completed in the second quarter and a total of 2.1 million square meters added in the first half of 2024. Notably, the Leipzig/Halle logistics region is witnessing substantial growth, driven by the expansion of VGP Logistics Park Leipzig Airport, where a new 24,000-square-meter facility is currently under construction.
Looking ahead, the report highlights potential future trends in logistics, including the possibility of logistics properties being connected to Hyperloop systems. As Germany’s population grows and the demand for goods transport increases, innovative solutions such as the Hyperloop, being researched at Emden/Leer University of Applied Sciences, may play a crucial role in meeting these challenges. Hollung speculates that the logistics real estate of the future might indeed require such advanced infrastructure.
