Logistics- and Industrial Market Overview
Logistics take-up falls just short of last year's record
Although the second half of the year was weaker than the first in terms of take-up, 2022 as a whole was very successful for the Berlin market. Around 1,119,300 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals, up 82% on the previous year (615,900 sqm).
A major contributor to the above-average result was the Tesla plant in Grünheide, with 327,000 sqm included in the figures for the first half of the year due to the receipt of planning permission (well after the start of construction). But even without Tesla, at 338,900 sqm, take-up in the second half of 2022 was slightly higher than in the corresponding period in 2021 (333,800 sqm). The industry ranking in 2022 as a whole was led by manufacturing with 43%. Retailers and E-commerce companies followed in second place with 28%, thanks to the conclusion of a number of deals including lettings by Sonepar of around 41,300 sqm and Lidl of around 39,000 sqm in Werder, and the deal struck by Picnic in Ludwigsfelde (approx. 32,000 sqm). The largest deals in the distribution / logistics sector were concluded by Schnellecke Logistics in Rangsdorf with around 32,700 sqm and VAH Jager in Oberkrämer with around 30,000 sqm.
Completions were also at record levels in 2022 at 580,600 sqm, up 186% on 2021 (203,000 sqm). There is currently around 301,600 sqm of warehousing space under construction in the region, with just 100,200 sqm of this still vacant. Available space in existing properties is also scarce and supply is very limited, especially in the urban area. The prime rent for warehousing space larger than 5,000 sqm increased from €6.25/sqm p.m. to €7.50/sqm p.m. due to the increasing space shortage.
Strong take-up despite slowing letting momentum
A total of around 242,000 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals in the Düsseldorf region* in 2022. Just under half of this was accounted for by retailers. This result is 1% higher year-on-year and has reached a level last seen in 2018. It is also 3% above the annual average of the past five years. The main reason for this strong result was the take-up performance in the first half of the year, during which almost three quarters of the take-up volume was achieved. The quarterly results in the second half of the year were significantly below average at around 39,000 sqm and 25,000 sqm. The slowdown in momentum was also reflected in the volume of completions which, at around 38,000 sqm, was just under half the five-year average. The last development of the year, a food fulfilment centre let to REWE with more than 11,000 sqm in Neuss, was completed in the third quarter. Although the development pipeline for 2023 suggests completions of just over 150,000 sqm, modern space available at short notice remains scarce in the region. Consequently, the growth in prime rents for warehousing space larger than 5,000 sqm has continued, with a rise from €6.50/sqm p.m. to €7.75/sqm p.m. recorded in the second half of the year. We expect a further slight increase to at least €8.00/sqm p.m. in prime locations by the end of 2023.
Low supply of space is reflected in the take-up result
Around 321,500 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals in the Frankfurt region* in 2022, the lowest result since 2009. A disappointing first quarter (47,400 sqm) was followed by an average second quarter (136,900 sqm), a weaker third quarter (86,300 sqm) and a very weak fourth quarter (50,900 sqm). Six deals involving units larger than 10,000 sqm were concluded and included lettings by a logistics service provider in Hammersbach (approx. 42,200 sqm) and a retailer in Raunheim (approx. 26,000 sqm). Most demand for space came from the distribution / logistics sector (41%), followed by retail (33%). The decline in take-up is not due to a drop in demand, but to the lack of space that can be acquired at short notice, which has become even more acute in recent months. This applies to both existing properties and development projects. The scarcity of land significantly restricts new construction activities. Of the space built in 2022 (around 171,900 sqm), just 2% was still available at the time of completion. As a result of this and the increased construction costs, rising rents are inevitable; the prime rent for warehousing space larger than 5,000 sqm has risen by 12% year-on-year to €7.30/sqm p.m. and a further rise can be expected over the next few months.
Prime rent rises to €8.00/sqm p.m.
Around 475,000 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals in the Hamburg region* in 2022, 25% less space than in 2021. However, the result was just 1% down on the five-year average. The strongest demand came from retailers (39%) and distribution / logistics companies (37%), including the three largest deals of the year in which Aldi leased approx. 42,400 sqm in Stelle, Airbus Logistik approx. 29,500 sqm in Geesthacht and Pfaff Logistik approx. 29,600 sqm in Hamburg-Waltershof. The expansive demand from eCommerce companies has weakened slightly, as consumers are more hesitant to spend and order volumes are down due to rising inflation.
Around 426,000 sqm of warehousing space was completed in 2022, all of which has already been secured by tenants or owner-occupiers. This includes the speculatively built two-storey Mach 2 logistics property with 114,000 sqm, which was constructed by Four Parx in Hamburg's Wilhelmsburg district and confirms the strength of demand for modern logistics space.
A further around 288,000 sqm of space is currently under construction with a third of this volume still available to the market, which could improve the supply situation. The space shortage, which is encouraging many companies to renew their existing leases instead of relocating, and increased construction costs have driven up rents. At €8.00/sqm p.m., the prime rent for warehousing space larger than 5,000 sqm has increased by €1.50/sqm p.m. since the end of 2021 and reached its highest-ever level.
Significant rent rises due to intensified shortage of space
A total of around 286,000 sqm of warehousing and logistics space larger than 5,000 sqm was taken up in lettings and owner-occupier deals in the Cologne region* in 2022, significantly exceeding the previous year's result by around 36% and the five-year average by 65%. Manufacturers accounted for most take-up at around 33%, whilst the distribution / logistics sector was particularly strong in terms of the number of deals. For instance, the IT distribution specialist Siewert & Kau secured around 24,000 sqm of corporate headquarters space by way of a sale & leaseback transaction. New construction activity declined significantly over the course of 2022, with a total of around 155,000 sqm of new shed space completed, most of it in the first half of the year. There is very little space being built in the region and speculatively built space is extremely rare, so there is hardly any space currently available to the market at short notice. This persistent bottleneck is also evident when analysing rental trends. Following an initial rise of €0.70/sqm p.m. in the prime rent for warehousing space larger than 5,000 sqm in the first half of the year, the price momentum accelerated again significantly in the second half of 2022. Compared to the mid-point of the year, the prime rent in the Cologne urban area increased by €1.50/sqm p.m. to €7.50/sqm p.m.
Prime rent rises significantly again in the second half of the year
Around 198,000 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals in the Munich region* in 2022. This is around 18% below the previous year’s result and 24% below the five-year average. The largest deal of the year was concluded by an owner-occupier in Germering and involved DHL’s construction of a 14,000 sqm warehouse. At around 67,000 sqm, manufacturers accounted for slightly more than a third of the annual take-up. They were followed by companies from the distribution / logistics and retail sectors, each with an around 13% share. Approximately one third of take-up in 2022 was accounted for by deals involving units larger than 5,000 sqm. The still very low vacancy rate and scarcity of land ensure that enquiries for space in this size range in particular are difficult to meet. The completion of around 148,000 sqm of warehousing and production space in the second half of 2022 will not fundamentally change this situation, as all of this space will be occupied by the time it is completed and there is hardly any speculative construction activity in the Munich region. As the completion pipeline is limited, with a total volume of around 40,000 sqm anticipated for 2023 and 2024, an improvement in the supply situation is not currently to be expected. This demand pressure continues to drive up prime rents, especially for units larger than 5,000 sqm, with a rise in the prime rent to €10.50/sqm p.m. in the second half of the year. This is a very significant increase of 35% compared to €7.75/sqm p.m. at the mid-point of the year.
Significant rise in prime rents in the second half of 2022
Around 640,000 sqm of warehousing and logistics space was taken up in lettings and owner-occupier deals in the Ruhr region* in 2022, which corresponds to declines of 19% compared to the previous year and 7% compared to the five-year average. The second half of the year accounted for 267,000 sqm, corresponding to 42% of the take-up for the year as a whole. The two largest deals in 2022 were registered in Oberhausen and involved the construction of a 50,000 sqm fulfilment centre for Picnic, an online supermarket, and a deal concluded by the logistics service provider ITG for a new building of almost 50,000 sqm.
In 2022, 40% of the take-up in the Ruhr region was accounted for by retailers and eCommerce companies, followed by distribution / logistics companies with a share of 32%, whilst manufacturers accounted for just 6%. Almost 75% of the deals involved unit sizes larger than 10,000 sqm.
Once again, the robust demand for the dwindling volume of industrial and logistics space caused the prime rent to rise to €7.50/sqm p.m. in the second half of 2022. This compares to a prime rent of €5.75/sqm p.m. at the mid-point of the year. This prime rent is achieved in Dortmund but some significant rent rises were also observed in most other locations.
Take-up almost doubles year-on-year
Around 272,000 sqm of warehousing and logistics space larger than 5,000 sqm was taken up in lettings and owner-occupier deals in the Stuttgart region* in 2022. The take-up volume has almost doubled compared to the previous year (+91%) and has increased by a significant 63% compared to the five-year average. Focusing only on the second half of 2022, this was weaker overall with a share of 36% of the annual take-up. Two major deals from the first half of the year are therefore decisive for the good annual result. The logistics service provider DSV leased around 60,000 sqm in Möckmühl in the Heilbronn administrative district and the retailer REWE secured around 40,000 sqm in Bondorf in the Böblingen area. In the Stuttgart region, 43% of space was taken up by distribution / logistics companies in 2022. Retailers and manufacturers followed with shares of 31% and 21%, respectively. There is an extremely tight supply of land and modern warehousing space in the region and construction activity, especially of a speculative nature, is very limited. This situation combined with the high demand for space has once again led to a significant rise in prime rents for warehousing space larger than 5,000 sqm in Stuttgart, from €7.65/sqm p.m. at the mid-point of the year to currently €8.30/sqm p.m. In addition to the city of Stuttgart, significant rent rises have also been observed in other locations in the region.
Demand for space remains high
The German market for warehousing and logistics space recorded a total take-up result of around 8.5 million sqm in 2022. However, despite falling just short of the previous year’s record result (8.67 million sqm), it still exceeded the five-year average by 19%.
Most demand for space came from distribution / logistics companies with 34%, followed by retailers with 29%. Manufacturers assumed third place, increasing their share of total take-up from 19% in 2021 to 27% in 2022, with two transactions of more than 100,000 sqm contributing to this result: the securing of planning permission by Tesla for the construction of its new 327,000 sqm plant in Grünheide (registered in the first quarter); and the start of construction of a factory by NOKERA AG for the production of timber construction residential buildings in Möckern, Saxony-Anhalt.
Demand for space remains high with many companies expanding their production, storage and distribution capacities in Germany to achieve greater independence from global developments. However, the shortage of space is still a major challenge, with a distinct lack of modern logistics space and land available at short notice in many regions.
Take-up in the Big 5 exceeds the five-year average by 16%
Around 2.36 million sqm of space was taken up in the Big 5 regions (Berlin, Düsseldorf, Frankfurt, Hamburg and Munich) in 2022, just 3% below the previous year’s record result and yet 16% above the five-year average. This can be attributed mainly to the exceptional performance of the Berlin region which recorded the highest take-up, almost doubling the record result of the previous year (616,000 sqm). The year-end figure of 1.12 million sqm in the take-up statistics has never been achieved in any of the major regions. In fact, take-up has only exceeded one million sqm once before when 1.05 million sqm of take-up was registered in 2016 in the Ruhr region.
After Berlin, the regions with the highest take-up in 2022 were Hamburg and Frankfurt which followed at a considerable distance with 475,000 sqm and 322,000 sqm (respectively), both with a significant year-on-year decline. Only Düsseldorf, which ranks fourth ahead of Munich in the ranking of the Big 5 regions, joined Berlin in surpassing its previous year's result.
After registering a high completion volume of 835,000 sqm in the first six months of 2022, a further 530,000 sqm was added to the market in the second half of the year. The volume of new construction has therefore more than doubled year-on-year. The largest number of completions was in the Berlin region, followed by Hamburg. Almost another million square metres of space is currently under construction in the Big 5, with 60% of this space already let or being built for owner-occupiers. Here too, most of the cranes are turning in Berlin and Hamburg, each with around 300,000 sqm under construction.
Besides the shortage of space, increased construction costs have been a major factor behind the rise in prime rents for warehousing space larger than 5,000 sqm in all Big 5 regions over the last twelve months. The prime rent has now exceeded €7.00/sqm p.m. in all Big 5 markets, with the strongest rises recorded in Munich (by 40% to €10.50/sqm p.m.), Berlin (by 36% to €7.50/sqm p.m.) and Düsseldorf (by 29% to €7.75/sqm p.m.). In Hamburg, it has risen by 23% to €8.00/sqm p.m. over the past twelve months and in Frankfurt, by 12% to €7.30/sqm p.m. We also expect prime rents to continue to rise in 2023.
The largest transactions outside the Big 5 are concluded by eCommerce companies
In 2022, around 6.18 million sqm was leased or secured by owner-occupiers outside the Big 5 regions*. This means that the 6 million sqm mark was exceeded for the second successive year and the final figure almost matched the previous year's result of 6.25 million sqm. The five-year average was also exceeded by 20%.
The analysis of take-up by sector shows a relatively balanced picture, with logistics / distribution companies responsible for almost 38% of the take-up result, followed by retailers with 28% and manufacturers with 26%.
The four largest transactions of 2022 took place in the first six months and included the two largest deals of the year, in which the online retailer Amazon leased around 225,000 sqm for a new fulfilment centre in Erfurt and commenced construction on an around 189,000 sqm fulfilment centre in Kaiserslautern. The largest deal in the second half of the year, the letting by a retailer of 76,000 sqm in a logistics park in Hainichen, Saxony, ranks fifth in the annual review.
72% of the space was secured in new buildings or development projects. This figure has not changed significantly over the last few years (five-year average: 74%).
Our Industrial and Logistics contacts:
Sarina Schekahn, Head of Industrial Leasing Germany
Diana Schumann, Co Head Industrial Investment Germany
Dominik Thoma, Co Head Industrial Investment Germany
Helge Scheunemann, Head of Research Germany
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