Nationwide logistics market shows noticeable recovery in the second quarter, but has not yet regained its former strength

BNP Paribas Real Estate publishes data on the logistics market for the first half of 2024

The German logistics market achieved take-up of around 2.44 million m² (including owner-occupiers) in the first half of the year. After a subdued start to the year with a result of just 1.02 million m², the market was able to increase both the amount of space taken up and the number of contracts signed in the second quarter, rising noticeably to 1.42 million m². Nevertheless, the half-year result remains 16% below the previous year's figure and, at minus 24%, is also well below the ten-year average. These are the findings of an analysis by BNP Paribas Real Estate.

"The still rather weak economic development continues to have a dampening effect on demand in the logistics letting market," explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH. "Companies are tending to delay investment decisions and hold on to existing space if possible. Two factors are primarily responsible for this: On the one hand, the rent level has risen not only across the board, but also in the modern space segment in particular, so that a move to modern space alternatives is currently always associated with a noticeable increase in costs on the user side, which many companies shy away from or are unable to bear in the current market environment. On the other hand, the lack of available space in the short term also remains a limiting factor in some markets. As a result, many companies are opting for lease extensions that are not relevant to take-up. Nevertheless, we saw more movement in the market in the second quarter than at the start of the year. This applies in particular to regions outside the major logistics hubs."

Mostly subdued momentum on the major logistics markets

The major logistics regions (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig and Munich) recorded the lowest result of the past ten years with a combined take-up of 854,000 m², around 13% below the previous year's result and 27% below the ten-year average. Cologne is the only market to achieve an above-average result; all other markets are currently at a below-average level. At the top of the ranking is Frankfurt, which, with 195,000 m² of take-up, achieved a significant increase compared to the weak first half of the previous year (+52 %). The same applies to Berlin, which recorded an increase of 21 % with 151,000 m² and, above all, Cologne, which achieved a good result with 145,000 m² (+164 %). By contrast, Hamburg recorded a weak result (-21 %) with 131,000 m² and the largest deviation from the ten-year average (-40 %), while Düsseldorf (92,000; -39 %), Leipzig (88,000 m²; -52 %) and Munich (52,000 m²; -69 %) all fell short of the 100,000 m² mark. Overall, the lower number of large-scale contracts is having a noticeable impact on the results - for example, only contracts of up to 12,000 m² and 10,000 m² have been registered in Berlin and Hamburg to date.

Outside the top locations, take-up totalled 1.59 million m², which is 18% below the previous year's level and 22% below the long-term average. What is remarkable here is the significant increase in momentum compared to the first three months of the year. The Ruhr region should also be emphasised, where the volume of take-up was 22% above the weak level of the previous year, but at 192,000 m² fell well short of the long-term average (-18%).

The largest rental contract in Germany was once again signed by the automotive segment with a new logistics centre for Mercedes Benz in Bischweier, Baden (around 100,000 m² of logistics space), but retail companies are also responsible for large-scale contracts, including Fressnapf in Nörvenich (68,000 m²), Lidl in Hückelhoven (64,000 m²) and Action in Wallersdorf (55,000 m²).

In terms of sector distribution, retail companies and manufacturing companies are almost equally represented with around 32% each. Logistics service providers are in third place with just under 29%, which is the furthest away from their ten-year average in a sector comparison. In this price-sensitive segment in particular, existing warehouses are increasingly being used to fulfil orders instead of renting new space. As the economy picks up, this demand group should also become more willing to conclude contracts again in the large-scale segment.

Prime rents remain largely stable

The strong growth in rents of recent years only continued in the first half of the year in certain areas and at a slower pace. Only in Frankfurt (+1%) and Hamburg (+2%) did prime rents rise slightly in the second quarter, while in all other top agglomerations they stabilised at the level achieved. In a twelve-month comparison, however, growth rates ranged from 3% to 11%. The average prime rent is now just under €8.10/m², which corresponds to an increase of 6.3% compared to mid-2023. Munich remains by far the most expensive location (€10.50/m²), followed by Hamburg (€8.50/m²) and Berlin (€8.20/m²). Frankfurt (€7.95/sqm), Düsseldorf (€7.90/sqm) and Cologne (€7.70/sqm) are still below the €8/sqm mark, while the figure for Leipzig is €5.90/sqm. The average rent level (€6.61/m²) has also hardly changed in a quarter-on-quarter comparison - only in Berlin has the average rent risen slightly. Compared to mid-2023, the increase amounts to just under 9 %.

Prospects

The weak economic development continues to have a dampening effect on the user markets and the resulting results. "However, there is definitely more movement in the market than the take-up of space reflects," explains Bastian Hafner, Head of Logistics & Industrial Advisory at BNP Paribas Real Estate GmbH. "Logistics service providers are filling existing capacity rather than renting additional space. Even lease extensions do not have an impact on take-up. However, they remain an important option for many occupiers and are also used to keep costs in check in an environment of rising rents or to secure space where there are hardly any alternatives due to the continued low supply of space in some markets. We are also observing that the subletting trend is slowing down and fewer users want to give up space."

The economy and the mood in the economy will continue to be decisive for the further development of take-up. The leading economic institutes are forecasting only slight economic growth until the end of the year, meaning that the general conditions for the logistics market will hardly change for the time being. However, positive signals are coming from the ECB's key interest rate cut in June and the associated fall in financing costs, lower energy prices and declining inflation, as well as a potential revival in private consumer spending due to rising real incomes. The global economy, which is slowly gaining momentum, should also provide an additional tailwind. The German export sector in particular should benefit from greater momentum on the international production, trade and consumer markets.

Against this backdrop, take-up should tend to remain stable until the end of the year and annual take-up is likely to be between five and six million square metres rather than the long-term average of just under 7 million square metres. Rents are also expected to remain largely stable.

Press contact:
Chantal Schaum - Tel: +49 (0)69-298 99-948, Mobile: +49 (0)174-903 85 77, chantal.schaum@bnpparibas.com
Viktoria Kühn - Tel: +49 (0)69-298 99-946, Mobile: +49 (0)173-968 60 86, viktoria.kuehn@bnpparibas.com

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