JLL anticipates year-end rally on logistics investment market

Prime yield to fall to 3.75% by end of 2019

October 07, 2019

FRANKFURT, 7th October 2019 – The transaction volume on the German logistics and industrial property market amounted to €1.9 billion in the third quarter of 2019, a remarkable result that was 146% above the 10-year average. Furthermore, the €1 billion threshold was exceeded in a three-month period for the eighth consecutive time. An even better performance is also eminently achievable in the fourth quarter. “A few medium-sized and large single-asset and portfolio deals are still in the pipeline and could be completed by the end of the year, providing an additional boost to the investment volume,” said Helge Scheunemann, Head of Research at JLL Germany. Overall, he expects the investment volume for 2019 as a whole to be similar to last year. In 2018, circa €7.5 billion was invested in the German logistics and industrial real estate market.

Properties with a value of around €4.7 billion changed hands in the first three quarters of this year, although the figure is 5% lower than the corresponding result for 2018 (€4.9 billion). “The fact that the volume does not quite match that of the previous year is mainly because the average size of big transactions was not quite as large as last year,” explained Scheunemann. In 2019, 10 transactions above €100 million took place in the first three quarters, which was in fact one more transaction than in the prior year. However, in 2018 the average size of such deals was €280 million, compared to just under €190 million in 2019.

The logistics industry currently accounts for 8% of the total transaction volume (€57.3 billion), and is ranked in fourth position behind the office, living and retail asset classes in Germany as a whole.

The largest transaction in the third quarter involved the sale of the Frasers logistics portfolio: Frasers Property, a listed real estate company from Singapore, transferred nine German and three Australian logistics properties to its subsidiary, the real estate investment trust (REIT) Frasers Logistics & Industrial Trust. The purchase of three German big box warehouses with 340,000 sqm by a joint venture of Green Oak and Apeiron for about €355 million remains the largest transaction of the year. The seller was a multi-family office from Dubai.

The mid-cap segment, which includes individual investments of up to €15 million, is also still popular with investors. In the first three quarters of this year, €780 million was invested in 122 transactions — somewhat more than in the corresponding period of 2018 when €640 million was invested in around 109 deals.

Companies participate more often as sellers

Asset and fund managers remain the biggest group of buyers on the German logistics and industrial property market, accounting for 51% of transactions in the first three quarters of this year. REITs were a distant second with a 10% share.

“Companies now form the biggest group of sellers, and were responsible for 28% of transactions in the first nine months,” said Dominic Thoma, Team Leader Industrial Investment at JLL in Munich. In 2018, companies accounted only for a 17% share. Developers, on the other hand, saw their share fall from 31% last year to 21% in the current year and are now in second place. Thoma: “On one hand, it has become increasingly difficult for developers of logistics facilities to find suitable plots, while on the other hand companies have in some cases acquired a taste for building their own properties and selling them directly in order to earn a better margin.” In addition, the current market situation offers attractive opportunities to sell older buildings no longer required for operations and centrally located sites as development areas, in some cases with short or mid-term leases. “Furthermore, companies are able to improve their operating performance through long-term sale-and-lease-back agreements,” said Thoma.

The German logistics investment market is also still relatively strongly influenced by the availability of foreign capital. “The proportion of foreign buyers reached 53% in the first three quarters, which is over 20 percentage points higher than the average for all asset classes,” said Thoma. However, the share has fallen compared to the two preceding years: in 2017 the proportion of foreign buyers stood at 72%, while in 2018 it was 59%. In contrast, domestic players play a more dominant role on the sales side, where the proportion of foreign investors is only 30%.

Prime yield continues to fall

The strong demand and short supply on the logistics and industrial property market are also having an impact on yields. The average prime yield has now reached an all-time low of 3.8% after falling a further 10 basis points in the third quarter. In the past 12 months, the value has dropped by 30 basis points in total. Scheunemann: The prime yield could decline further to 3.75% by the end of the year.”

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of more than 93,000 as of September 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit