Logistics property investments exceed €1bn for third successive Q1

Logistics and industrial property market boosted by high number of transactions even without big-ticket deals

April 08, 2019

FRANKFURT, 8th April 2019 – Never before have so many transactions been registered as in the first quarter of 2019. This was particularly evident in the mid-cap segment, which includes deals of up to €15 million. This category accounted for 53 of the 73 transactions in total, equating to a volume of €340 million and significantly outperforming the previous year. In contrast, large transactions in the three-digit-million range amounted to only three and included the acquisition of a portfolio, as part of a sale-and-leaseback transaction, by Tristan and Barings from the Nagel Group, with a total of 34 properties in Germany and Denmark.

The top five transactions in the first quarter thus amounted to only about €580 million, which is well below the previous year’s figure (Q1 2018: €876 million) and the record volume of 2017 (Q1 2017: €1.31 billion). They accounted for a 44% share of the total transaction volume of €1.33 billion for the January-March period. “Nevertheless, the first quarter of 2019 can be described as quite successful based on the interplay between the increased number of deals overall and slight 9% decline in the volume,” said Willi Weis, Head of Industrial Investment at JLL Germany.

The volume for a first quarter exceeded the €1 billion threshold for the third time in succession, and also surpassed the five (+6%) and ten-year (+69%) averages “This was also achieved despite the lack of big-ticket deals, and illustrates the importance of the logistics asset class to investors alongside office, retail and living,” said Weis.

The strong demand further pushed down prime yields on the logistics and industrial property market. The average yield fell by 40 basis points within a year. “In the traditional core product sector, with prices of between €20 million and €40 million and ten-year leases, the prime yield still has a ‘4’ before the decimal point. However, there are an increasing number of single asset transactions larger than €80 million with lease contracts of 15 years and more that are being traded for returns of well below 4%,” said Weis.

The logistics property market in Germany is still strongly influenced by foreign capital. The proportion of international investors reached 48% in the first quarter (€642 million), which is well above the average for all asset classes (32%). On balance, foreign players increased their property assets. “Their share is much lower compared to 2017 (72%) and 2018 (59%) because few large transactions took place in the first three months of the current year. Foreign players like to participate in the larger deals,” said Weis. He added: “I am nevertheless convinced that we will again see a similarly strong performance in the current year. Domestic and international capital could then generate a total transaction volume of €7.5 billion, which would be 31% above the five-year average.”