Existing portfolios return to the focus of logistics investors

Window for low price level likely to close over the course of the year

FRANKFURT, 24 April 2024 - The German industrial and logistics real estate market continues to be in demand among investors: they invested around EUR 1.7 billion in the first quarter of 2024, 64% more than in the previous year. The transaction volume is therefore on a par with the ten-year average, with the result only falling short of the five-year comparison by 20 per cent due to the particularly strong years 2021 and 2022. Logistics accounted for the largest share of the transaction volume across the asset classes at 27 per cent, followed by office properties and mixed-use properties at 19 and 17 per cent respectively.

The increased number of large transactions with a volume of more than 100 million euros had a particularly positive effect on the transaction volume. While only two deals together totalled €250 million at the start of 2023, six transactions with a value of €900 million have now been completed, accounting for 52% of the total volume. A total of 62 deals were counted in the first quarter, seven more than in the previous year. The average deal size rose from 19 million to 27 million euros.

"Occupier demand, rent increases, the key role in supplying the economy and consumers and the lack of issues such as home offices or rent caps make logistics properties sought-after investment products. In the course of diversifying their portfolios in economically and geopolitically challenging times, investors have increasingly turned to logistics," says Diana Schumann, Co-Head of Industrial & Logistics Investment JLL Germany. "The market is likely to pick up even more over the course of the year, which is why we are forecasting an annual transaction volume of eight billion euros."

"Although supply and the number of pitches have increased significantly once again, not all products are finding their way onto the market yet," says Dominic Thoma, Co-Head of Industrial & Logistics Investment JLL Germany. "Now that the European Central Bank has indicated that the key interest rate is likely to have peaked, there was no rate cut in April for the time being and investors are looking ahead to the next ECB Governing Council meeting in June. As a result, some sellers are continuing to deliberately hold back their products in the hope of achieving higher proceeds through a lower base rate and more favourable financing conditions. At the same time, demand and liquidity on the market are good, investors' tables are relatively empty and interest is therefore high."

Focus on core-plus

Anyone who wants to buy at the bottom of the market must do so now, advises Thoma. "Core-plus investors in particular are feeling the pressure to invest because they know that the window of opportunity in which they can acquire a good logistics property for a solid price is narrowing. Lower key interest rates and more favourable conditions will bring more investors onto the scene and this should drive up prices even further."

"Core-plus properties that are suitable for refurbishments and manage-to-green projects may offer potential for rent and therefore value increases," says Schumann. "Whether we succeed in realising this will depend in particular on the location quality of the assets. We are observing a return of location quality as one of the main investment criteria in the investor landscape." At 60 per cent, core-plus accounted for the largest share of the transaction volume. Properties with the Opportunistic risk profile accounted for 15 per cent, while Value-add accounted for 13 per cent and Core properties for 11 per cent. "In the medium term, core properties, which are definitely in demand, are also likely to be offered again as soon as the first documented comparable transactions give sellers enough confidence that the market is ready and will honour them accordingly," adds Thoma.

The largest transactions in the first quarter included a joint venture between the logistics property developer VGP and the investment company Areim. The investment company Clarion Partners Europe also acquired another logistics property portfolio from Blackstone, including six properties in Germany. Shurgard's acquisition of the self-storage operator Pickens also means that it now owns six properties. In addition, the food retailer Rewe acquired a logistics property in Bondorf, which it had previously leased, from the investment firm Invesco.

"While some investors continue to focus on low-volume individual deals, others are showing increased interest in existing portfolios," says Schumann. "We are increasingly supporting pitches and off-market discussions at portfolio level. Joint ventures are also in demand, although opportunities are limited. Due to rising rents, users are also acquiring properties they once rented, while other users are raising capital through sale and leaseback transactions, particularly in the automotive sector."

Prime yields for offices and logistics are converging

The investment market for logistics properties was dominated by international players: they accounted for around 70 per cent of buyers and a similarly strong 68 per cent of sellers. On balance, they have built up a property portfolio of 27 million euros.

Meanwhile, prime yields stagnated in a quarter-on-quarter comparison and remain at between 4.4 per cent (Berlin, Düsseldorf, Frankfurt, Hamburg, Munich) and 4.45 per cent (Cologne, Stuttgart). Compared to the same quarter last year, they have thus risen by 45 to 50 basis points. This means that the average prime yields in the seven property strongholds for logistics (4.41 per cent) and office (4.36 per cent) are once again converging significantly. In Cologne, Düsseldorf and Frankfurt, prime logistics yields are already below their office counterparts.

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

About JLL

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, hospitality, residential and retail properties. As a Fortune 500® company with annual revenues of $20.8 billion and offices in more than 80 countries worldwide, our approximately 106,000 employees offer the power of a global platform combined with local expertise. Driven by our goal of shaping the future of property for a better world, we help our clients, employees and the  community - true to our motto "SEE A BRIGHTER WAY". JLL is the brand name and a registered trademark of Jones Lang LaSalle Incorporated. All contact details and press information for JLL Germany can be found at: jll.de/press