The logistics letting market is losing momentum - logistics and automotive companies delivered large-scale deals in 2023

FRANKFURT, 30 January 2024 - The German market for warehouse and logistics space suffered a setback in 2023: At 6.25 million m² (owner-occupiers and lettings), take-up fell 27 per cent short of the previous year. The decline was only slightly more moderate compared to the five-year average (minus 18 per cent) and the ten-year average (minus eight per cent). The final quarter was disappointing at 1.46 million m², after 2.06 million m² had been taken up in the third quarter. Compared to the previous year, the number of contracts signed fell by around twelve per cent to 690. Just under a quarter of take-up was accounted for by owner-occupiers, whose space is recorded at the start of construction and is therefore included in the statistics at the start of the contract, in contrast to lettings.

"The regionally varying supply and demand situation is clearly reflected in the weaker take-up of space," says Sarina Schekahn, Head of Industrial & Logistics Agency JLL Germany. "The optimisation of supply chains as well as transport costs and times is leading to increased occupier requirements. More than ever before, the focus is on locations close to city centres with smaller spaces, particularly favoured by retail companies and logistics providers, although the supply of developable space is naturally limited. As the distance from the strongholds increases, demand decreases significantly and existing space must fulfil numerous factors in order to be successfully let. These often large-scale properties are now missing from take-up."

As a result of economic uncertainty and increased rents, available lease options are often used to extend contracts for the time being, which is not included in the statistics, Schekahn continues. "However, this is an alarming signal for the market, as it could lead to the conclusion that demand is too low for new project developments. Furthermore, the large number of lease extensions in most locations means that vacancy rates are extremely low."

"Big 5" metropolitan areas: significant drop in take-up due to fewer large deals

The five major metropolitan areas will account for a particularly large share of the lower take-up. Around 1.55 million m² was taken up in Berlin, Düsseldorf, Frankfurt, Hamburg and Munich in 2023 - around 34 per cent less than in the previous year and 26 per cent less than the five-year average. Frankfurt came out on top with 438,800 m² and a decent increase of more than a third. Düsseldorf also recorded an increase - albeit a weak one at three per cent - with 250,000 m². All other regions recorded a double-digit decline. Berlin accounted for the second-largest take-up with 405,400 m² - although it also registered the largest drop of 64 per cent, due to the exceptionally high take-up of 1.1 million m² in the previous year. The owner-occupier Tesla alone contributed 327,000 m² to take-up at that time. At 280,400 m², Hamburg is around 41 per cent down on the previous year's figure, while Munich is down 14 per cent at 170,400 m². With the exception of Düsseldorf, all regions also recorded a significant five-year average decline.

The decline is primarily due to a lower number of large contracts: Only 37 contracts, 20 fewer than in the previous year, were counted in the order of more than 10,000 m². The strongest demand came from companies in the transport, traffic and warehousing sector. They were responsible for 38 per cent (586,000 m²) of total take-up. Companies from the industrial and retail sectors followed with 28 per cent and 21 per cent respectively. The four largest deals were concluded by logistics companies: Space totalling 38,700 m² and 33,200 m² was rented at Magna Park in Werder near Berlin. In Dormagen near Düsseldorf, the figure was 34,200 m² and in Ludwigsfelde near Berlin around 31,400 m².

Although warehouse space totalling around 667,000 m² was completed in the five strongholds in 2023, the volume has halved compared to the previous year. Only 20 per cent of the space was available at the time of completion. Of the approximately 792,000 m² currently under construction, 46 per cent is still unlet. At 165,000 m², the greatest construction activity can be observed in Berlin.

"In contrast to other asset classes in the logistics sector, we do not currently see any project developers who are stumbling or insolvent," says Schekahn. "Nevertheless, increasing caution is noticeable: developers are paying more attention to what they develop and under what circumstances, which is why the proportion of speculative projects is currently lower than that of built-to-suit properties. Financing speculative properties is already more difficult to implement, and in view of the situation in other property segments, banks could become even more restrictive when granting financing and increase their requirements."

Prime rents for space of more than 5,000 m² have risen in all five logistics centres. Düsseldorf recorded the strongest growth with 12.9 per cent to EUR 8.75/m², followed by Berlin with 6.7 per cent to EUR 8.00/m². In Frankfurt, the figure rose by 4.1 per cent to EUR 7.60/m² and in Hamburg by 3.1 per cent to EUR 8.25/m². By far the highest prime rent is being asked in Munich at 10.70 euros/m², albeit with a low growth rate of 1.9 per cent. Looking at the past five years, the increases ranged from 26.7 per cent in Frankfurt to 62 per cent in Düsseldorf. Hamburg recorded an increase of 42.2 per cent, Berlin 45.5 per cent and Munich 50.7 per cent.

Outside the five strongholds: industry reaches a share of 40 per cent for the first time

Around 4.7 million m² was taken up in the regions outside the five conurbations in 2023. This was 24 per cent below the previous year's figure of 6.18 million m² and 14 per cent below the five-year average. In particular, lettings fell significantly by 30 per cent, while take-up by owner-occupiers was only six per cent lower. The three deals above the 100,000 m² mark were all concluded by owner-occupiers: Daimler Truck began construction of its 260,000 m² logistics centre in Halberstadt, while VW is building a 210,000 m² facility in Salzgitter. In Horn-Bad Meinberg, a new 175,000 m² building is being constructed for the online giant Amazon. The largest lettings are from two well-known car manufacturers: almost 87,000 m² are being built in Bitterfeld-Wolfen and around 79,000 m² in Pilsting.

Accordingly, around 40 per cent of take-up in the five property strongholds is accounted for by industrial companies - significantly more than the five-year average of 27 per cent and the highest share in the sector for ten years. Users from the transport, traffic and logistics sector account for 30 per cent and retail companies for 23 per cent of turnover.

"Automotive has taken on an important role as a logistics property driver in 2023," says Schekahn. "In addition to the logistics sector, retail also remains a very important user segment and its growth continues, although it is no longer as rapid as it was during the pandemic. In 2023, in addition to logistics service providers, e-commerce companies in particular sublet space and available (grey) space. Automotive, on the other hand, continues to require a large amount of space to manufacture and store combustion and electric cars in parallel, as well as batteries for the latter. Although the sector also accounts for a significant share of the sales volume in the five strongholds, the regions outside them are benefiting in particular from the shift in demand due to the much better availability of space."

The strongest region in terms of take-up outside the five strongholds is once again the Ruhr area with around 560,000 m². Around 477,000 m² was taken up in the Hamburg/Braunschweig region, followed at some distance by Osnabrück/Münster (292,500 m²) and Leipzig/Halle (273,700 m²). Around 70 per cent of take-up was in new builds/project developments, and 100 per cent of take-up was for space of more than 50,000 m².

Contact: Sarina Schekahn, Head of Industrial & Logistics Agency JLL Germany
Phone: +49 (0) 40 350011 149
Email: sarina.schekahn@jll.com

About JLL

For more than 200 years, JLL (NYSE: JLL), a leading global commercial property and investment management firm, has helped clients acquire, build, occupy, manage and invest in a wide range of commercial, industrial, hospitality, residential and retail properties. As a Fortune 500® company with annual revenues of $20.9 billion and operations in more than 80 countries worldwide, our approximately 105,000 employees offer the power of a global platform combined with local expertise. Driven by our goal of shaping the future of property for a better world, we help our customers, employees and society - true to our motto "SEE A BRIGHTER WAY".