BNP Paribas Real Estate publishes data on the logistics investment market for Q2 2023 - No revival on the logistics investment market in the second quarter

In the past three months, a transaction volume of just under € 600 million was recorded, which corresponds to the second-lowest quarterly figure in the past 10 years. This brings the total volume for the first half of the year to €1.55 billion, which is 76% below the record result from the previous year and 53% below the long-term average. This is the result of an analysis by BNP Paribas Real Estate.

"After a subdued start to the year, the German logistics investment market also failed to pick up noticeably in the second quarter. The current lack of major portfolio transactions is particularly noticeable here. Only €80 million can currently be attributed to the segment, which is by far the lowest figure in the past 10 years," explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH. Although the volume of individual deals (€1.47 billion) is also below the long-term average, it is on a par with the pre-coronavirus level.

Düsseldorf and Stuttgart achieve good results

In the first six months of the year, around € 569 million was invested in logistics properties in the major locations, which is a good third below the long-term average. Driven by the largest transaction of the year to date, the sale of the "Areal Böhler" business park for more than €150 million, Düsseldorf is currently at the top of the ranking of major markets. While Stuttgart (€112 million, +33% compared to 2022) also achieved a comparatively good result, all other locations recorded significantly lower volumes than usual in some cases. Munich is in third place with a good €108.5 million (-45%). Leipzig (€81 million; -33%), Berlin (€65 million; -88%), Frankfurt (€30 million; -84%) and Cologne (€13.5 million; -25%) followed in third place. Meanwhile, no transactions have yet been registered in Hamburg.

The lack of major portfolio transactions to date is clearly reflected in the distribution of the investment volume across the individual size categories. The proportion of large transactions above the €100 million mark is just 10%, the lowest level ever recorded. Only one transaction can be assigned to this category so far. Meanwhile, with a contribution of €523 million, the €50 to €100 million segment accounts for the largest share of turnover, which is only slightly below the long-term average.

Specialist funds in the lead by a wide margin

As in previous years, the current distribution of the investment volume among the buyer groups is led by special funds, which contribute around 45% to the result. Translated into absolute figures, this corresponds to a good € 700 million, which equates to their usual level of activity. Project developers are a distant second (just under 15%). They invested a total of € 228 million by the end of the first half of the year, which is largely due to the sale of the "Areal Böhler". All other buyer groups have shares in the single-digit percentage range. Real estate companies/REITs came in third place in the ranking of the most active buyers with just under 9%.

The German logistics investment market was clearly dominated by domestic buyers in the first half of the year. With a 61% share, they made an unusually high contribution to turnover. This clearly reflects the fact that current market activity is taking place almost exclusively in the individual transaction segment. In contrast, the high turnover shares of foreign investors in recent years were consistently associated with large portfolio transactions. European investors are currently the most active international buyer group, accounting for 20% of the total. North American investors also make a notable contribution to turnover (a good 12 %).

Moderate rise in yields in Q2

Against the backdrop of further interest rate hikes by the major central banks, financing costs continued to rise in the second quarter. As expected, the net prime yields for logistics properties also saw a further slight upward movement. However, at 5 basis points, the increase over the last three months has been moderate. This means that net prime yields of 4.00% are currently recorded for the A cities. The last time they were at this level was in the second quarter of 2019. In Leipzig, yields are currently at 4.20 % (also +5 basis points compared to Q1 2023).

Prospects

"The current conditions suggest that further, albeit moderate, interest rate hikes by central banks will follow in the second half of the year. Accordingly, the end of the price discovery phase will be further delayed, which means that a significant upturn in transaction activity is not very likely within the next six months. Even if the current economic outlook does not in itself speak in favour of a major tailwind from the user markets, the very low vacancy rate in the logistics segment should nevertheless lead to a further increase in rent levels. Investors with strong equity capital in particular are therefore likely to see an opportunity in the current phase," says Christopher Raabe.

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