BNP Paribas Real Estate publishes data on the logistics investment market for the first quarter of 2023 - Cautious start to the year on the logistics investment market

Frankfurt am Main, 5 April 2023 - The rapid change on the global financial markets in combination with the current uncertainties regarding the further development on the user markets have noticeably dampened the momentum on the commercial investment market at the start of the year. Even the logistics asset class, which has been comparatively crisis-resistant in the recent past, is not exempt from this development. At around € 951 million, the logistics investment market had its weakest start to the year since 2016 (€ 818 million), falling short of the previous year's record result by around 80 % and the long-term average by 47 %. This is the result of an analysis by BNP Paribas Real Estate.

"What is remarkable, however, is that the current result is based entirely on individual deals and their volume is roughly in line with the long-term average. The fact that single deals alone have almost reached the €1 billion mark indicates that buyers and sellers are continuing to find each other in the current phase. However, both sides are currently scrutinising the market much more closely than in previous years, which means that transactions are being carried out more selectively," explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH.

Disproportionately high share of top markets

In the first three months of the year, €521 million was invested in logistics properties in major locations. They currently account for around 55% of sales, which is significantly higher than the average of the last five years (28%) and indicates that investors continue to focus on the core and core-plus segment. The significant rise in logistics rents in the top markets in the second half of 2022 despite all the economic uncertainties, coupled with very low vacancy rates, is likely to play a decisive role here. However, a differentiated look at the individual cities reveals a mixed picture. While no take-up was registered in Frankfurt and Hamburg, Düsseldorf (€156 million), Stuttgart (€112 million) and Leipzig (€79 million) achieved very good results in a long-term comparison. Meanwhile, lower than usual results were reported for Munich (€96 million), Berlin (€65 million) and Cologne (€14 million).

Only one deal in the three-digit million segment

The lack of large portfolio transactions is reflected in the distribution of turnover across the size categories. With the sale of the "Areal Böhler" business park, only one transaction in the three-digit million range was recorded. With a turnover contribution of € 390 million, the largest share is currently attributable to deals in the € 50 to 100 million size segment.

As in previous years, the distribution of the investment volume across buyer groups is led by special funds, which contributed around 30% to the result. In absolute terms, however, the €286 million currently registered represents a decrease of 28% compared to the long-term average. Meanwhile, project developers are in second place, accounting for 21.5 % of turnover. The very good performance of this group, even in a long-term comparison, is largely due to the largest deal of the year to date, the sale of the "Areal Böhler" business park for more than €150 million. Investment/asset managers also contributed a double-digit share of turnover with a good 17%.

National investors contribute more than half

The distribution of the investment volume by origin of capital currently reflects the lack of portfolio transactions to a certain extent. In recent years, foreign investors have often participated in the market through large package purchases and have often contributed the majority of the investment volume. However, in the current market environment, which is characterised by individual transactions, domestic investors are in the lead with a 56% share of turnover.  The most active international buyer groups in the first quarter were North American and European investors. However, at € 184 million (-58 %) and € 127 million (-65 %) respectively, both groups are well below their respective long-term averages in absolute terms.

Slight increase in yields

As the central banks raised key interest rates again in the first quarter of 2023, higher financing costs continue to be the dominant issue on the logistics investment market. Accordingly, net prime yields have risen slightly by a further 10 basis points since the start of the year. The A cities are now quoted at 3.95 %, while Leipzig is at 4.15 %.

Prospects

"As further interest rate hikes by the central banks cannot be ruled out in the coming months, transaction activity on the logistics investment market is likely to remain significantly inhibited in the second quarter. A sustainable conclusion to the price discovery phase and the associated increase in market momentum is only likely to be foreseeable once market players are certain that interest rates have peaked. From today's perspective, it seems likely that this will happen during the second half of the year. Meanwhile, it already seems certain that the transaction volume at the end of the year will be well below the long-term average (€6.8 billion)," says Christopher Raabe.

Press contact:
Chantal Schaum - Tel: +49 (0)69-298 99-948, Mobile: +49 (0)174-903 85 77, chantal.schaum@bnpparibas.com
Viktoria Gomolka - Tel: +49 (0)69-298 99-946, Mobile: +49 (0)173-968 60 86, viktoria.gomolka@bnpparibas.com
Melanie Engel - Tel: +49 (0)40-348 48-443, Mobile: +49 (0)151-117 615 50, melanie.engel@bnpparibas.com

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