Logistics investment market almost back to its former strength

High volume in the second half of the year helps the market exceed the ten-year average

FRANKFURT, 18 January 2024 - The German investment market for logistics and industrial properties achieved a transaction volume of EUR 7.3 billion in 2023. The second half of the year stands out in particular, with investments totalling over five billion euros, more than twice as high as in the first half of the year. The transaction volume was 24 per cent lower than in the previous year and around 15 per cent below the five-year average. However, the 2019 result was exceeded, as was the ten-year average by around 11 per cent.

The logistics market is the only property investment market to record such positive growth in 2023. This brings it closer to the residential investment market (€8.2 billion). The retail and office asset classes continue to lag far behind.

Diana Schumann, Co-Head of Industrial & Logistics Investment JLL Germany: "Our forecast for the year as a whole, which we had already raised in October, was exceeded once again. The second half of the year had a significant influence here, which also benefited from catch-up effects, but above all proves that the market has almost fully returned. Activity picked up again significantly at the beginning of 2023, resulting in the deals that were brought to the notary from the middle of the year."

In 2022, 280 transactions were registered; in 2023, the figure was only slightly lower at 271. 123 of these were in the first half of the year, while the second half saw slightly more deals at 148. In view of the significantly higher transaction volume in the second half of the year, it is clear that investors are increasingly venturing into larger properties again. This is also reflected in the deals worth more than €100 million: with 16 deals, there were only three fewer major transactions than in 2022. Together, they accounted for 43 per cent of the total volume.

Of the five largest deals, four were finalised in the third quarter, with the last of the bunch dating from the fourth quarter. Deka made by far the largest acquisition with the purchase of a 50 per cent stake in a portfolio from logistics developer VGP. DFI Real Estate transferred six project developments to the Hansa German Logistics Impact Fund, a joint venture between DFI and Hansainvest Real Assets. Blackstone sold a portfolio of five logistics properties to Clarion Partners Europe, while P3 secured the AXA/Baytree portfolio. The five largest deals accounted for around 23 per cent of the total transaction volume.

Dominic Thoma, Co-Head of Industrial & Logistics Investment JLL Germany: "We have noticed a shift in the past year: Instead of traditional investments in completed properties, property companies and investors increasingly entered into joint ventures with project developers. In view of the continuing difficult circumstances for project developers, this increases security for them and makes it possible to improve the financing of projects. Investors, in turn, can enter the value chain at an early stage and achieve higher returns, albeit with a higher risk compared to the purchase of a completed property. There were already several such joint ventures among the major transactions in 2023. We expect further such joint ventures in the current year, and talks are already being held in many places in the background."

Focus on core-plus properties with rental growth potential

The proportion of domestic and international market participants was comparatively balanced in 2023: 51 per cent of buyers came from Germany, while the proportion of sellers was slightly higher at 56 per cent. On balance, international investors built up a property portfolio of 359 million euros. At 59 per cent, more than half of total investments went into core-plus properties. Core properties accounted for just 17 per cent, while value-add accounted for 14 per cent and opportunistic investments for nine per cent. "Many investors are currently focussing on core-plus properties with rental growth potential, with refurbishments and manage-to-green projects on the agenda," says Schumann. "Investors expect property in very good locations in particular to increase in value through rent increases, which is why they are prepared to invest significantly more money here."

Following the oscillation of the past two years and the sideways movement since mid-2023, swap rates fell by almost 100 basis points in the fourth quarter. "There will be good opportunities for buyers over the next few months, given that interest rates are slowly falling and purchase prices have probably bottomed out. If interest rates fall further and those investors only finance later, they will benefit from a positive leverage effect," says Thoma. "Nevertheless, not all buyers are currently taking action. Particularly in open-ended property funds, it must be expected that further liquidity reserves will be built up initially."

Meanwhile, prime yields in the seven property strongholds have risen once again: At the end of 2023, they were between 4.40 and 4.45 per cent. This represents an increase of 25 to 30 basis points compared to the previous quarter, explains Schumann: "After the prime yields of offices and logistics properties had recently continued to converge, they diverged again slightly in the fourth quarter." Most recently, office properties were quoted at 4.29 per cent. "However, there is still a realistic possibility that prime logistics yields will be lower than those of offices over the course of the year," says Thoma. "We expect logistics to attract further capital and investors, as the asset class will be spared major uncertainties such as rent caps or home offices and near-shoring and near-storing will also ensure demand in the long term."

About JLL Germany

For more than 200 years, JLL (NYSE: JLL), a leading global commercial property and investment management firm, has helped clients acquire, build, occupy, manage and invest in a wide range of commercial, industrial, hotel, residential and retail properties. As a Fortune 500® company with annual revenues of $20.9 billion and operations in more than 80 countries worldwide, our approximately 105,000 employees offer the power of a global platform combined with
local expertise. Driven by our mission to shape the future of property for a better world, we help our customers, employees and society - true to our motto "SEE A BRIGHTER WAY".

Contact:

Dominic Thoma, Co-Head of Industrial & Logistics Investment JLL Germany
Phone: +49 (0) 89 290088 127
Email: dominic.thoma@jll.com

Contact:

Diana Schumann, Co-Head of Industrial & Logistics Investment JLL Germany
Phone: +49 (0) 211 13006 410
Email: diana.schumann@jll.com