Twelve major transactions drive the logistics investment market forward

Volume in the first half of 2024 significantly exceeds previous year's figure

FRANKFURT, 18 July 2024 - The German industrial and logistics real estate market clearly outperformed the previous year in the first half of 2024: at EUR 3.4 billion, the figure for the middle of 2023 was exceeded by a hefty 59 percent. The two first quarters of the current year are equally responsible for this, with €1.7 billion each. Although the five-year half-year average was missed by six per cent, the ten-year counterpart was exceeded by seven per cent. While logistics was still the top asset class on the property investment market in the first quarter, residential is now in first place (24%), closely followed by logistics (22%). Offices account for 19 per cent and retail for 16 per cent.

The enormous increase in major transactions on the logistics market is striking: while only two deals worth more than €100 million were recorded in the same period of the previous year, there were already twelve transactions by mid-2024, which were also concluded in equal parts in the quarters. This explains why the number of deals fell by 16 to 107 compared to the same period of the previous year despite the increased transaction volume. However, the average deal size almost doubled from 18 to 32 million euros.

"Although the logistics market developed well in the first half of the year as expected, the European Central Bank's late interest rate decision in June caused a delay. However, it provides a solid basis for an even stronger second half of the year," says Diana Schumann, Co-Head of Industrial & Logistics Investment JLL Germany. "For the year as a whole, we expect a transaction volume of eight billion euros, as the number of products on the market has increased and includes several portfolios that will generate a larger volume. At the same time, the willingness to buy has increased even more than expected."

Dominic Thoma, Co-Head of Industrial & Logistics Investment JLL Germany, explains the increased number of offers: "Since the beginning of the year, we have had evidence that the logistics investment market has bottomed out. At that time, however, some owners were still sceptical and held back their products. The key interest rate cut by the European Central Bank in June then gave them sufficient security to place their properties on the market. Fortunately, there was no glut of properties, but the market is still characterised by excess demand due to an increased willingness to invest. This is again leading to the first purchase price increases in the sales processes and is helping the market to return to the strength of previous years."

The two largest transactions of the first half of the year took place in the second quarter: The investor Branicks sold a portfolio to the developer and portfolio holder P3, while the Swiss investor Stoneweg took over the Australian Cromwell Property Group's fund management platform and thus also its co-investments. A joint venture between the logistics property developer VGP and the fund management company Areim originated in the first quarter. The investment company Clarion Partners Europe also acquired another logistics property portfolio from Blackstone, including six properties in Germany.

Core transactions remain rare

At 61 per cent, the majority of investments are in core-plus properties, while core properties account for 17 per cent. 14 per cent are opportunistic transactions and nine per cent are value-add properties. "Developments of logistics properties continue to be characterised by low land availability, high construction costs and financing conditions. This is leading to a smaller proportion of speculative developments, which are also encountering a slight decline in user demand in certain regions and sectors. Construction activity is therefore likely to remain subdued for the time being and lead to a gap in ESG-compliant new build product, which is of interest to the currently particularly liquid core capital," says Schumann.

However, it is not only experienced logistics investors who are looking at project developments: "Large fund managers are driving the diversification of their portfolios: specialists from the office, retail and living asset classes with their own segment-specific challenges want to gain security, and logistics investments can make a decisive contribution to this," says Schumann. As a result, the German logistics investment market is once again becoming more of a focus for international players: they account for around 67 per cent of buyers and 43 per cent of sellers. Accordingly, they increased their property portfolios by a net €818 million.

Prime yields continued to move sideways in the second quarter of 2024, ranging from 4.40 per cent (Berlin, Düsseldorf, Frankfurt, Hamburg and Munich) to 4.45 per cent (Cologne, Stuttgart). This means they have risen by 35 to 40 basis points since the same quarter of the previous year. The average prime yields of the seven property strongholds for logistics (4.41 per cent) and offices (4.36 per cent) are still close to each other. In Cologne, Düsseldorf and Frankfurt, however, the values for logistics were lower than those for offices.

"At the moment, prime prices cannot rise any further; a few things would have to change for this to happen," explains Thoma. "Interest rates would have to fall a little further; all eyes are on the ECB to implement the next interest rate hike. In addition, there are currently still sufficient investment opportunities with attractive yields in other asset classes and outside the property sector, and investors are currently still finding it difficult to abandon their higher yield requirements. As soon as more capital enters the market and sellers are prepared to return their core products to the market, top prices will also rise again. We can already observe this in the processes for smaller-volume core properties. In addition, an increase in core-plus yields can already be observed today. By the end of the year, the net prime yield is also expected to start moving and fall to 4.25 per cent."

Contact: Dominic Thoma, Co-Head of Industrial & Logistics Investment JLL Germany
Phone: +49 (0) 89 290088 127
Email: dominic.thoma@jll.com

Contact: Diana Schumann, Co-Head of Industrial & Logistics Investment JLL Germany
Phone: +49 (0) 211 13006 410
Email: diana.schumann@jll.com

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