LIP Invest, the leading provider of special logistics real estate funds in Germany, publishes the latest edition of its quarterly market report “LIP UP TO DATE – Logistics Real Estate Germany”. The report analyses the developments in the German logistics real estate market, from investment volume, take-up and new construction activity to yield development and geopolitical influences on the logistics industry.
Armament is a space driver, not a mega-trend
Defence-related uses can take place in many different types of properties, logistics tasks are part of it. At present, however, the order and rental situation for the logistics of armaments-related goods is still relatively manageable.
“Armaments is a new space driver like the established drivers of e-commerce, automotive, refrigerated goods or hazardous goods, which of course has a positive effect on the logistics real estate market. But this does not solve the central challenges of our industry: electricity availability, approval procedures and financing are currently the sticking points. The amount of reporting on the topic of defence suggests a false market impression of logistics, but unfortunately not that much has been received yet,” says Sebastian Betz, Managing Partner of LIP Invest, adding: “For investors, third-party usability, location quality and future viability remain the central acquisition criteria. And these are not necessarily the case with so-called armament objects in terms of location and object criteria. We think it is wrong to structure new funds exclusively for armaments objects, if only for reasons of diversification.”
Investment momentum continues
The transaction volume on the German investment market for logistics real estate amounted to EUR 1.5 billion in the second quarter. The half-year result totals 2.6 billion euros and is almost at the previous year’s level. The second quarter was buoyed by a number of larger deals, although small- to medium-volume transactions continue to dominate investment activity.
Demand for space at its highest level in the last three years
The rental market continued to grow at 1.9 million square metres. A total of 3.3 million square metres of logistics space was let or newly built in the first half of the year, which means that the letting market is well above the half-year level of the last three years. On the other hand, new construction activity remains low. The volume of new construction in the second quarter amounted to around 800,000 square metres.
Yields up as expected
As expected, yields on logistics properties rose in the second quarter. The prime yield (BAR) for new buildings is now between 5.00% and 5.40%. Behind this range is an increasingly differentiated transaction activity. Smaller new buildings with long-term leases in top locations currently achieve the lowest yields of around 5.00%. The rise in yields is likely to continue in the coming quarters, provided that the effects of the Iran conflict continue to influence the capital markets and the financing environment.
Download the market report free of charge
The complete market report “LIP UP TO DATE – Logistics Real Estate Germany” with all figures, graphics and assessments is available for download free of charge at: https://www.lip-invest.com/downloads/
Image source: LIP Invest GmbH
Sebastian Betz, Managing Partner of LIP Invest
Image source: LIP Invest GmbH
