Logistics rental market gets off to a subdued start in 2023 - lack of available space leads to low take-up

FRANKFURT, 10 May 2023 - Significantly less space was let on the German market for warehouse and logistics space at the start of the year than in the previous year. At 1.2 million m², the decline in the first quarter of 2023 corresponds to around 49 per cent. The result fell short of the five-year average by 37 per cent and deviated from the ten-year average by around 30 per cent.

Sarina Schekahn, Head of Industrial & Logistics Agency JLL Germany: "Demand for industrial and logistics space remains at a consistently high level. However, as a result of the economic uncertainties, a considerable number of project developments have failed to materialise, which poses challenges for interested parties and users. A number of companies have started to exercise their options and extend their leases early on pre-crisis terms. This allows them to secure the space they need at an early stage and avoid the risk of not being able to find new space on the open market. We will continue to face the challenge of available properties and vacant space. Demand, which is already high, is likely to increase even further due to the signs pointing to an imminent economic recovery."

Turnover in the metropolitan regions down by almost 40 per cent in a five-year comparison

Around 320,000 m² was taken up in the five major metropolitan areas (Berlin, Düsseldorf, Frankfurt, Hamburg and Munich) in the first quarter of 2023. This is around 62 per cent less than in the same quarter of the previous year and around 39 per cent less than the five-year average. Overall, the logistics and warehouse market lacked deals in the size segment of more than 10,000 m², with total take-up almost halving from 147,000 m² in the same quarter of the previous year to 88,300 m². The low level of activity among owner-occupiers is also a contributing factor, with activity within the five metropolitan areas plummeting by 97 per cent. "In the recent past, the difficult financing situation, coupled with increased costs, has led many owner-occupiers to put far-reaching decisions and activities on hold for the time being or to delay them as much as possible. Potential owner-occupiers have therefore already opted for tenancies as a temporary solution," says Schekahn.

The Frankfurt region recorded a year-on-year increase in take-up volume of 22 per cent to 58,000 m². At 65,500 m², a similarly high level was achieved in Munich, with a slight increase of four per cent. There were more significant falls in take-up in Düsseldorf (minus 21 per cent) and Hamburg (minus 46 per cent). In Berlin, take-up fell by 89 per cent, although this was a one-off effect: in the same quarter of the previous year, owner-occupier Tesla received planning permission for its plant, which at 327,000 m² accounted for around two thirds of quarterly take-up there.

Although significantly below the previous year's result, Hamburg was the best performer among the five metropolitan areas with around 89,400 m² due to three deals above the 10,000 m² mark. Munich was in second place with around 66,000 m², followed by Frankfurt, Düsseldorf and Berlin with volumes of 58,000 m² to 53,000 m².

The strongest demand, at 97,000 m² and a share of 30 per cent, came from companies in the retail sector. The largest share, 25,000 m², was accounted for by e-commerce companies, mainly food delivery services such as Flink, Picnic and Alpakas. Companies from the transport, traffic and warehousing sectors accounted for a letting volume of 74,000 m², while industrial companies accounted for 66,000 m².

"We are experiencing sustained demand from the automotive sector. In addition to the parallel production of combustion and electric cars, disrupted supply chains continue to lead to more pronounced stockpiling and thus to increased space requirements for manufacturers. In the pharmaceutical sector, too, the supply chain-related undersupply of medicines, especially for children, requires more extensive warehousing. As individual companies from other sectors are also temporarily downsizing due to seasonal uncertainties, these companies in particular are trying to capitalise on space by subletting
," says Schekahn.

Around 222,000 m² of logistics and warehouse space was completed in the first quarter of 2023, most of it in the Berlin region, followed by Hamburg. A total of around 900,000 m² of space is currently under construction in the five conurbations. Berlin and Hamburg are also leading the way, with developments totalling 270,000 m² and 230,000 m² respectively. "45 per cent of this space has already been let or is being built for owner-occupiers. The proportion of speculative developments is therefore not low, but a lot more needs to be developed in total to even begin to meet the demand," says Schekahn. The largest projects under construction are in Berlin's Umland-West (Straße der Einheit 142-148) with just under 50,000 m² and in Hamburg's Umland-Süd with 42,000 m² of space used by Aldi.

After prime rents for space of more than 5,000 m² had already risen significantly in the fourth quarter of 2022, they rose again in Hamburg and Düsseldorf by three to ten per cent to €8.25/m². By contrast, values remained unchanged in Berlin at 7.50 euros/m², Frankfurt at 7.30 euros/m² and Munich at 10.50 euros/m².

Four largest transactions of the quarter registered outside the metropolitan regions

Outside the five major metropolitan areas, around 881,000 m² of logistics and warehouse space in the size segment of more than 5,000 m² was taken up in the first quarter of 2023. Declines were also registered there, albeit with a comparatively smaller drop of 43 per cent compared to the first quarter of 2022 or minus 36 per cent compared to the five-year average of the first quarters.

"Due to the enormous shortage of space in the metropolises and the persistently high demand, companies are increasingly moving to regions outside the conurbations. Areas that were once out of the question for them are now increasingly coming into focus," says Schekahn. The four largest transactions in Germany were recorded outside the five conurbations: BMW Group, Rhenus Warehousing Solutions Europe WM Group and Robert Bosch, among others, rented a total of almost 250,000 m² of space in the municipalities of Pilsting (Lower Bavaria), Sülzetal (south of Magdeburg), Greven (near Münster) and Philippsburg (between Heidelberg and Karlsruhe).

While companies from the transport, traffic and warehousing sectors were responsible for just under 36 per cent of take-up, 27 per cent was accounted for by the industrial sector and 11 per cent by retail companies.

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For more than 200 years, JLL (NYSE: JLL), a leading global commercial property and investment management firm, has helped clients acquire, build, occupy and invest in a wide range of commercial, industrial, hotel, residential and retail properties. As a Fortune 500 company with annual revenues of USD 20.9 billion and offices in more than 80 countries worldwide, our approximately 103,000 employees offer the power of a global platform combined with local expertise.

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Contact:

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Senior Manager Corporate Communications JLL Germany

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