Heavily influenced by foreign capital
German logistics and industrial property market delivers a positive result for the first half of 2019
FRANKFURT, 5th July 2019 – After making a successful start to the new investment year during the first three months of 2019, the German logistics property market again achieved a higher transaction volume of €1.45 billion in the second quarter. The resulting half-year volume of almost €2.8 billion is at a similar level to last year as well as the five-year average. “To gain an idea of the extent to which the asset class has developed over the past ten years to become an integral part of the investment strategies of a wide range of investors, you only have to look at the amount of capital that flowed into the logistics and industrial property market in the first half of 2009: €235 million. In 2019, the half year-average for the last ten years was exceeded by a remarkable 62%,” said Timo Tschammler, CEO of JLL Germany.
After the first six months, logistics and industrial property accounted for 9% of the total transaction volume (€32.2 billion). Six transactions in the three-digit million range, which is two more than in the same period of the previous year, amounted to €1.06 billion in the first six months.
However, the most recent deals were much smaller than in 2018 (€306 million) with an average size of €176 million and contributed 38% to the total logistics transaction volume (H1 2018: 43%). The largest transaction so far this year amounted to approx. €355 million and was completed in the second quarter. It involved the purchase of three German big box facilities with a total area of 340,000 sqm by a joint venture of Green Oak and Apeiron. The seller, a multi-family office, came from Dubai. The largest single-asset transaction was the sale of an ECE project development in Ansbach for Hermes with a value of about €120 million.
In the mid-cap segment, which includes investments of up to €15 million each, 79 transactions were completed in the first half of the year with a volume of €540 million — significantly more than a year previously (H1 2018: €360 million; 66 transactions). “An increasing number of investors are willing to invest in small buildings in the logistics and industrial sector. This meets the need of small and medium-sized enterprises to realise hidden reserves in operational property. Sale and lease back arrangements in this area are increasingly common,” said Tschammler.
“Given that there are notable core portfolios in the market, such as the Maple portfolio or Union Investment’s North portfolio, as well as larger single-asset transactions that, driven by e-commerce users, continue to put pressure on prime yields, JLL is still forecasting a result at a high level for 2019 that could amount to €7.5 billion. Owing to pressure caused by the strong demand, the prime yield has fallen further. It lost 35 basis points within a year and stood at 3.9% by the end of June. For the first time, the prime yield in the logistics segment has therefore fallen below the 4% mark. International investors in particular are ready to dig deep into their pockets,” said Tschammler.
Indeed, the logistics investment market in Germany continues to be heavily influenced by foreign capital. The proportion of foreign investors reached 55% in the first half of the year, which is significantly more than the average across all asset classes (34%).
Timo Tschammler concluded: “It is exciting to see the market development of well-located industrial sites, especially in former outlying urban areas that have been used for industrial purposes for decades and still are. Industrial companies are often unaware of the value that lies dormant on their books. Cities are in many cases willing to change the building law for a higher-value use in the interests of active urban development. One example is the Benrather Gärten project involving the conversion of a 150,000 sqm industrial site in Düsseldorf-Benrath into a residential and commercial property complex by the new owner. Outokumpu, an international stainless steel company headquartered in Helsinki and the seller of the former cold-rolling mill, was advised by JLL.”
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