BNP Paribas Real Estate publishes data on the logistics market for the first quarter of 2024 - Logistics market starts the year with subdued take-up of space

The German logistics markets were characterised by generally subdued market activity in the first three months of 2024. Take-up of space totalled just 1.02 million m² (including owner-occupiers) by the end of the first quarter. Although this means that the 1 million m² mark was exceeded again right at the start of the year, it is nevertheless the weakest start to the year since 2010, when the German logistics markets were still struggling with the real economic after-effects of the global financial crisis. While the current result is 18% below the quarterly figure from the previous year, the ten-year average was undercut by around 31%. This is the result of an analysis by BNP Paribas Real Estate.

"The economic downturn, which has now persisted for several quarters, also made itself clearly felt for the first time in registered logistics space take-up with a slight delay at the beginning of 2024. We are currently observing that many companies are still looking into renting new space at an early stage and are also entering into contract negotiations. However, the average duration of the letting process has gradually increased over the last few months. This is not least due to the fact that many companies are keeping a much closer eye on their costs in view of the economic uncertainties. The fact that new contract rents have risen sharply almost across the board since the coronavirus pandemic has naturally contributed to this. Accordingly, occupiers are currently increasingly tending to draw on their contract options where possible and extend expiring leases. As a result, fluctuation in the market is currently lower than it was one or two years ago. As there have been hardly any vacancies since the e-commerce boom that accompanied the pandemic, companies interested in renting new space are faced with the challenge of finding suitable space. This applies to the location, the size and quality of the space and, in particular, the rent level. The willingness to accept high rents is generally also present in more price-sensitive sectors. However, the rental properties must also meet certain requirements, such as fast motorway access and good availability of employees or the availability of public transport connections. However, vacant space with these attributes is rare in the core areas of large conurbations," explains Bastian Hafner, Head of Logistics & Industrial Advisory at BNP Paribas Real Estate GmbH.

Major logistics regions with mixed results

Compared to the market as a whole, the major logistics regions (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig and Munich) had a moderate start to the year. At a total of 425,000 m², current take-up is 23% below the long-term average, but exceeds the previous year's result by around 7%. However, a closer look at the individual locations makes it clear that there is a dichotomy in terms of market dynamics. Although Frankfurt achieved the highest take-up of space of the top markets in the ranking with 77,000 m² (-27 % compared to the 10-year average), it remained well below the respective long-term average, as did Berlin (70,000 m²; -47 %), Hamburg (66,000 m²; -38 %) and Munich (18,000 m²; -64 %). What all of these markets have in common is that no major transactions above the 12,000 m² mark were recorded in the first quarter. Munich stands out in particular here. Although the Bavarian capital is not traditionally known for boasting a large number of big-box deals, the first quarter of 2024 saw a first: all market activity took place in the segment up to 5,000 m². Meanwhile, Cologne is at the other end of the spectrum. With take-up of 75,000 m² (+29 % compared to the long-term average), the Rhine metropolis recorded the third-best result of the last 10 years, which is largely due to two non-representative large deals. Leipzig (62,000 m²; +17 %) and Düsseldorf (57,000 m²; +19 %) also achieved very solid results.

Outside the top agglomerations, take-up totalled 595,000 m² by the end of March, which was 30% below the previous year's result and around 36% below the long-term average. This reflects the fact that only a small number of large contracts were signed nationwide. The largest contract of the year to date is the letting of 68,000 m² of logistics space by the retail company Fressnapf in Nörvenich, North Rhine-Westphalia, brokered by BNP Paribas Real Estate. Other deals in the segment above 50,000 m² include a lease from the discount retailer Action in Wallersdorf (55,000 m²) and the start of construction for the expansion of the MAN Truck & Bus logistics centre in Salzgitter (52,700 m²).

In terms of the distribution of total take-up across the individual sectors, the usual picture can be seen: Industrial/production companies and logistics service providers each account for around 34 %, ahead of retail companies with a good 25 %.

Prime rents in Q1 with only selective increases

In a twelve-month comparison, average prime rents in the top locations rose by a good 9% to €8.05/m². However, growth slowed noticeably in the first quarter. Only Hamburg and Berlin recorded increases. Both markets increased by 20 cents each to €8.30/m² and €8.20/m² respectively. Munich remains by far the most expensive market at €10.50/m². While Düsseldorf (€7.90/m²), Frankfurt (€7.85/m²) and Cologne (€7.70/m²) remain slightly below the €8 mark, Leipzig, the most affordable top location, currently stands at €5.90/m². The picture for average rents is a little more differentiated. With Düsseldorf (+30 ct; €6.50/m²), Hamburg (+15 ct; €6.40/m²), Berlin (+10 ct; €7.00/m²) and Leipzig (+5 ct; €5.00/m²), more than half of the locations recorded an increase compared to the previous quarter. In Munich (€8.70/m²), Frankfurt (€6.70/m²) and Cologne (€5.80/m²), meanwhile, there was a sideways movement. In a 12-month comparison, the average increase across all top locations is 12%.  

Prospects

The weak economy clearly left its mark on the German logistics space market in the first quarter. Accordingly, the development of take-up over the rest of the year will be closely linked to how quickly the mood in the economy brightens. Most forecasts currently assume that the economic recovery in Germany will be slow, meaning that GDP is only expected to grow slightly by the end of the year. Accordingly, the economic situation is likely to remain tense until the middle of the year and then gradually improve. This assumption is supported not least by the most recent ECB meeting. Although key interest rates were left untouched for the fifth time in a row despite falling inflation, the ECB's Governing Council has now held out the concrete prospect of easing monetary policy at its next meeting in June. This step is likely to make many companies more willing to invest again, which will also be reflected in growing demand for logistics space, albeit with a slight time lag. In addition, there are currently many indications that the Fed will cut key interest rates much later than its European counterpart. German exports are likely to benefit greatly from the resulting strong dollar, at least temporarily. Positive impetus can also be expected from a brightening of the consumer climate, which is currently still clearly in negative territory but should improve significantly from the middle of the year, in line with a possible ECB interest rate cut. As consumer spending increases, demand for space from retail companies, which has contributed significantly to the record results of the German logistics market in the recent past, will also accelerate again.

"Even if there are good arguments in favour of a recovery on the logistics market in the near future, it remains to be seen how quickly this will translate into rising take-up. The past has shown that economic fluctuations, both in one direction and the other, only become visible in the figures after a certain delay. However, the first three months are also traditionally the weakest of the year in terms of sales per square metre, so we are already expecting a slight increase in the second quarter. However, it is unlikely that the result at the end of the year will be in line with the long-term average (around 7 million m²). The target is more likely to be in the region of 5 million m². Rents are expected to move sideways at the peak for the time being. Average rents, on the other hand, are likely to increase somewhat in many locations," says Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH, summarising the further outlook.

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

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