Logistics market lacks lettable space - high demand meets low supply, low vacancy rate and little new construction

FRANKFURT, 4 August 2023 - Around 2.05 million m² was taken up on the German market for warehouse and logistics space in the first half of 2023. Compared to the strong prior-year period with 4.8 million m², this represents a significant drop of 58 per cent. The five-year average was also missed by 46 per cent and the ten-year average by 41 per cent. The decline in the number of lettings was somewhat more moderate: 27 per cent fewer lettings were concluded in the first half of 2023, bringing the total to 300.

"The low take-up of space in the first half of the year is based on numerous factors, some of which indicate that demand remains high," says Sarina Schekahn, Head of Industrial & Logistics Agency JLL Germany. "Owners are reporting full lettings and vacancy rates in most regions are negligible. Where still possible, the situation will intensify in view of the existing shortage of both space to let and land. Even today, it is often no longer possible to fulfil large-scale requests. Many users are switching to markets in other countries that were not previously in their focus, while others are pulling out their options in order to at least secure a tenancy."

Another cause is the lack of new builds, explains Schekahn. "The market lacks speculative properties in particular. Developers are again increasingly relying on sufficient pre-letting, as they prefer to play it safe in view of the continuing high financing costs and lower sales factors compared to previous years." Nevertheless, it should not be forgotten that some users are currently assessing their economic situation as negative. "The manufacturing and retail sectors in particular, which are important demand groups in the logistics and industrial segment, are pessimistic."

Turnover in the five conurbations at its lowest level in the last ten years

In the first half of 2023, take-up in the five metropolitan areas (Berlin, Düsseldorf, Frankfurt, Hamburg and Munich) totalled around 655,000 m², which is the lowest figure in the past ten years. Compared to the same period of the previous year, the drop was 58 per cent, and the five-year average was undercut by 40 per cent. This is primarily due to the lack of deals larger than 20,000 m², of which only three contracts were concluded in the first few months. In the first half of 2022, the figure was 14.

Only the Munich region achieved slight growth of eight per cent with a take-up volume of 120,000 m². The other regions recorded a significant year-on-year decline. With around 173,000 m², Hamburg is the region with the highest take-up, although the year-on-year decline of 40 per cent is also significant. Take-up in the Frankfurt region was 138,000 m² (down 25 per cent). The Berlin region (119,00 m², down 85 per cent) follows at some distance and with the sharpest year-on-year decline, although the comparative figure is a particularly strong previous year due to the building permit for the Tesla site in Grünheide, which alone accounted for 327,000 m². Düsseldorf plummeted by 41 per cent and recorded the lowest take-up of the five metropolitan areas at 105,000 m².

A total of 254,000 m² of warehouse space was completed in the Big 5 in the first half of 2023, around 70 per cent less than in the first half of the previous year with 835,000 m². Most completions were in the Berlin and Frankfurt regions. The volume of space under construction also declined, from around one million m² at the turn of the year to 623,000 m². Of this space, 58 per cent is currently available, with the main focus of construction activity in the Hamburg and Berlin regions.

"Due to the high demand, developments must be driven forward, including in B and C locations. Due to the lack of space, users will increasingly have to accept that supply chains should be adapted to the available and affordable locations," says Schekahn. "Prime rents will continue to rise, especially in A-locations, due to higher construction costs, higher quality space and ESG factors."

For space of 5,000 m² or more, prime rents have once again risen significantly year-on-year. The highest prime rent of EUR 10.50/m² was achieved in Munich in the middle of the year, which corresponds to an increase of 35 per cent. This is followed by Düsseldorf at EUR 8.50/m² (up 31 per cent) and Hamburg at EUR 8.25/m² (up ten per cent). In Berlin (up 20 per cent) and Frankfurt (up seven per cent), the asking price is now EUR 7.50/m².

Automotive sector dominates outside the five metropolitan areas

Around 1.39 million m² was taken up outside the five metropolitan areas in the first half of 2023. This is the first time since 2010 that the volume has fallen below the 1.5 million m² mark, which represents a year-on-year decrease of 58 per cent. The five-year average was also missed by 48 per cent. A decline is noticeable in all sectors, but particularly in the retail and e-commerce segments, where 82 per cent less space was rented than in the first half of 2022. They accounted for 14 per cent of total take-up. The balance was dominated by the transport, traffic and warehousing sector with a share of 42 per cent and industrial companies with 32 per cent, with the automotive sector in particular showing increased demand for space. No lettings of more than 100,000 m² were registered, compared to three deals in the first half of 2022.

The largest deal in the first half of 2023 was recorded in the Leipzig/Halle region, where a well-known car manufacturer rented around 87,000 m² in Bitterfeld-Wolfen to operate its largest spare parts warehouse worldwide. A car manufacturer is also responsible for the second-largest deal: BMW rented around 80,000 m² for its new logistics centre in Pilsting, Lower Bavaria. The space is scheduled for completion in the second quarter of 2024. The third-largest deal was signed by logistics service provider Rhenus, which concluded a contract for more than 70,000 m² in Sülzetal near Magdeburg.
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Contact: Sarina Schekahn, Head of Industrial & Logistics Agency JLL Germany
Phone: +49 (0) 40 350011 149
Email: sarina.schekahn@jll.com