BNP Paribas Real Estate publishes data on the logistics market for the first half of 2023 - Logistics lettings market picks up in the second quarter

Momentum on the German logistics letting market increased noticeably in the second quarter, with take-up of 2.9 million m² (including owner-occupiers) reported for the first half of the year. As expected, this means that the market cannot match last year's brilliant result (4.8 million m²), which was largely driven by the Tesla construction start in Grünheide near Berlin with 327,000 m², but the ten-year average of around 3.2 million m² (-10%) also remains unattained for the time being. The current result reflects the weak economic phase and, in particular, the continuing imbalance between supply and demand. This is the result of an analysis by BNP Paribas Real Estate.

"The ongoing phase of economic weakness is certainly not leaving the German logistics markets unscathed, as we can see from the slower pace of space decisions on the part of retail companies, among other things. However, the core problem of the decline in space is clearly the prevailing lack of supply rather than the economically challenging environment, which is emphasised by the half-year figures of logistics service providers and production companies. Despite the current economic conditions, they have generated take-up close to or even above the long-term average. We have to recognise that the continuing mismatch between supply and demand and the resulting rent increases are preventing higher take-up. As in previous months, many companies opted for lease options, i.e. lease extensions, instead of new space in early summer 2023 due to a lack of alternative space or for reasons of cost savings. In particular, the lack of modern, large-scale existing properties as well as land for prospective new development continues to be a significant factor," explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH.

In the first half of 2023, the proportion of new-build take-up was 63.5% nationwide, once again falling short of the long-term average of 65.9%. The demand that could ensure higher take-up in the new-build segment is certainly there, but the shortage of supply is having a strong dampening effect here. The downward trend in the proportion of owner-occupiers appears to be continuing. Their current market share is 31%, which is noticeably below the 10-year average of over 39%. However, there are exceptions here too. For example, the start of construction of the gigafactory totalling around 210,000 m² by owner-occupier Volkswagen in Salzgitter, which plans to produce battery cells there from 2025, falls within the half-year turnover period.  

Top markets: almost all logistics regions with a significant increase in take-up in Q2

Take-up rose in almost all leading logistics regions in Germany compared to the first quarter, with impressive increases ranging from just under 27% in the Düsseldorf region to 220% in the Leipzig market area, where an industrial company in Bitterfeld-Wolfen will take a good 80,000 m² for its production facilities. However, the pace of transactions slowed slightly in early summer in Hamburg, where the overall good result at the start of the year was missed by a comparatively narrow margin of 12.5%, and in Cologne, where the market is far from returning to its former strength (-17% compared to the previous quarter) due to the pronounced shortage of supply. Despite the recent market recovery, the half-year results in many regions not only lag behind the strong results of the first half of 2022, but also fall short of the long-term average by a comparatively wide margin. Positive exceptions to this are the leading regions nationwide in terms of take-up, Leipzig with 185,000 m² (+37 % compared to the long-term average) and Munich (169,000 m²; +43 % compared to the long-term average), as well as Düsseldorf with 152,000 m² or a result almost 31 % above the 10-year average. The Hamburg market is currently on a par with Munich, but cannot fulfil its own expectations with a take-up of 165,000 m² (-27 % compared to the long-term average). Frankfurt (128,000 m²; -51 %), Berlin (125,000 m²; -48 %) and above all Cologne (55,000 m²; -48 %) follow at some distance. Overall, take-up in Germany's top 7 logistics regions totalled 979,000 m². The record result from the previous year was thus missed by -45% and the 10-year average by around -19%. The year-on-year decline in the Ruhr region was of a similar magnitude at -49% to 157,000 m², although the fall was much sharper than the long-term average at -31%. Due to the shortage of supply in the core markets, which dominates for long stretches, more and more searches are also being realised outside the top agglomerations. Accordingly, the other regions analysed by BNP Paribas Real Estate registered above-average take-up of 766,000 m² (+5 % compared to the 10-year average). This is the third-highest result in history after the record result for the first half of 2022 (1.2 million sqm).

Average and prime rents continue to rise

There is only one direction for rents in 2023: upwards. The prevailing supply bottleneck has led to a sustained rise in rents over the course of the year. The average prime rent in the top logistics markets of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne and Munich rose by 11% to currently €7.61/m². At €9.50/m², Munich remains by far the most expensive location (+19% year-on-year), followed by Hamburg (€7.90/m²; +14%) and Berlin (€7.80/m²; +4%). The sharp rise in rents at the top end of the market in Leipzig is remarkable, with an increase of 19% over the past twelve months to a new high of €5.60/m². Average rents have also risen sustainably in all leading logistics locations over the past 12 months. On average, growth of a good 9% was registered. The average rent paid is €6.08/m².

Further market recovery expected in the second half of the year

The German economy is well placed to pick up speed again in the second half of the year. On the one hand, inflation is trending downwards, while on the other, the German labour market is very robust and is having a stabilising effect on previously declining private consumption. In addition, German industry not only has a high order backlog, which it can quickly process due to easing supply bottlenecks, but it is also likely that foreign demand will pick up again as the global economy recovers. Domestic orders have already turned positive again recently. "Supported by a more dynamic economic development, we expect the nationwide logistics markets to pick up further in the second half of the year. In view of the frequent lack of alternative space and the high level of rents, lease extensions will certainly remain an attractive solution for many companies looking for space, but we assume that the increasing demand for space will also have a positive impact on take-up. An annual result in line with the long-term average should therefore be realistic for many logistics regions. Meanwhile, rents will continue to trend upwards due to the ongoing supply shortage and increasing ESG requirements," says Bastian Hafner, Head of Logistics & Industrial Advisory at BNP Paribas Real Estate GmbH, summarising the outlook.

Logistics letting market grows in the second quarter | BNP Paribas Real Estate

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