February 19, 2013, Munich – A year-on-year increase of approx. 38% was recorded in Germany on the market for logistics and industrial real estate in 2012 with a transaction volume of almost €1.63 billion. This type of property’s share of the entire commercial investment market, which generated a transaction volume of around €25.4 billion in 2012, was slightly above 6%, approximating the long-term average value. The share of international investors accounted for around 47% in 2012. Package sales reflected a market share of around 30%, or approx. €495 million.
Focus on portfolio assets
One of the major transactions of 2012 was part of a share deal in the amount of approx. €137 million with Tristan Capital Partner for a Prologis portfolio comprised of eight properties and funds managed by Prologis. Prologis also entered into a joint venture with the management company of the Norwegian state-owned pension fund, Norges Bank Investment Management (NBIM), at the end of the year and brought 9 properties located in Germany to the joint venture within the scope of this transaction. “Among other things, these transactions led to the investment of almost 1.3 million euros in portfolio assets, or around 80 percent of the total capital invested in 2012,” says Andreas Trumpp, Head of Research at Colliers International, Germany. “Another reason for this high market share is the fact that the offer of property developments and new buildings that are of interest to investors continues to be limited,” he adds.
Three groups of buyers generate more than 50% of transaction volume
Open-ended real estate funds and special funds comprised the largest investor group in 2012 with an investment volume of slightly below €443 million and a transaction volume share of 72%, followed by opportunity and private equity funds with approx. €230 million (14%) and corporates and owner-occupiers with around €196 million (12%). Despite the comparatively low transaction volume share of new buildings at 20%, property developers sold logistics and industrial real estate in the amount of approx. €499 million in 2012, reflecting a 31% market share. They had either held the property for some time before selling or sold the property without any significant renovation. Corporates and owner-occupiers sold real estate with an investment volume of around €289 million (18%), followed by open-ended real estate funds and special funds in the amount of almost €266 million (14%).
Excess demand for prime logistics real estate
Similarities can be seen between investor behavior and activity in the general real estate sector and particularly in the office segment. “Demand continues to be focused on densely populated areas as well as on core and core plus real estate,” says Marcus Blumenthal, Senior Consultant Industry and Logistics at Colliers International, Munich. “However, the offer remains limited since there are not enough property developments to meet increasing demand,” he adds. German institutional investors are currently having a hard time finding properties that fit their search profiles. Prime yields therefore remained persistently stable at low levels in 2012. The most expensive locations were Frankfurt am Main and Munich, each with prime yields of 6.90%, followed by Hamburg and Stuttgart, each with 7.20%, Duesseldorf with 7.25% and Berlin with 7.40%.
Outlook: Brisk market activity expected in 2013
The lack of new and modern logistics real estate of interest to investors that we saw in 2012 will continue in 2013. “The high property prices in densely populated areas, the difficulty in getting local permits, the trend toward shorter lease terms and other strict financing conditions are the main reasons for this offer bottleneck,” says Marcus Blumenthal. “However, there’s no lack of demand for new building space in densely populated areas. Because available space is limited, some of the major users are starting to take matters into their own hands when it comes to satisfying their need for space and are becoming new players on the market,” adds Hubert Reck, Partner at Colliers International, Stuttgart. In 2013, investors are going to focus heavily on the few core properties in the most significant, densely populated areas in Germany. Value-added products are also in high demand, even though the parties interested in these products often come from local markets or tend to focus on larger portfolios. We can therefore generally expect to see stable prime yields. In specific locations, however, we may also see some decrease. “Despite limited new construction volumes, we predict brisk activity this year on the logistics investment market since some larger portfolios will hit the market over the course of the year,” Hubert Reck summarizes.