Colliers Reports New Record in Logistics Investments

A high level of activity in the logistics real estate market has resulted in an exceptional transaction volume of over 9.2 billion euros. The previous record year of 2017 was surpassed by 8 percent in 2021. The asset class logistics ranks second (15 percent market share) and overtakes retail real estate by the end of the year. However, the gross prime yield decreases by 45 basis points to 3.25 percent.

(Frankfurt/Main) The German industrial and logistics real estate market ends the year 2021 with a new record volume. According to Colliers, over 9.2 billion euros were invested in German industrial and logistics assets. The previous record year of 2017 (around 8.7 billion euros) was surpassed by about 8 percent after an above-average year-end rally. Notably, the result from 2017 was primarily achieved through three large-scale billion-dollar platform acquisitions, while in 2021, not a single transaction of this magnitude was recorded in the German market, and ultimately, the high market activity alone led to the outstanding result.

The five-year average was significantly exceeded by 37 percent, allowing the asset class to continue to establish itself as the second strongest real estate type among investors in the German commercial real estate market. Logistics real estate currently ranks second with a market share of 15 percent ahead of retail real estate.

Nicolas Roy, Head of Industrial & Logistics at Colliers: “The commercial real estate market in Germany is experiencing a real hype around the asset class, largely due to the extremely promising developments over the last 24 months. The crisis-resistant demand for logistics space during the pandemic played a significant role, as did the associated boom in online retail and the necessity for a well-functioning urban logistics system to handle the above-average package volumes. According to a forecast by the Federal Association of Parcel and Express Services (BIEK e.V.), the number of parcel shipments in Germany is expected to increase by 8 percent annually to 5.7 billion by 2025, promising sustainably positive growth on the demand side. In light of a severely limited supply of space, we continue to expect positive rent growth accordingly.”

Forward Deals Gain Importance

As the supply, especially in the core area, is very limited and only a small number of high-quality new construction properties are available on the market, more and more investors are opting for a forward deal as an alternative in the currently highly competitive market, where new construction projects are acquired from the developer before completion. Buyers hope to secure an attractive investment opportunity early on. An example of this is the project development “Coreport II” in Reichertshofen (between Munich and Nuremberg), where Real I.S. AG secured the approximately 12,400 square meter new logistics property from Intaurus even during the construction phase.

Large-Volume Single Investments Shape the Market

Around 2.9 billion euros or nearly one-third of the revenue could be attributed to package sales. However, the share of portfolio deals in total revenue has shown a declining trend, as was the case in the previous year (2020: 35 percent vs. 2019: 40 percent). Although more portfolios were counted than in the last two years, the share of the total volume remained below average. This is primarily due to the disproportionately high share of single investments made in 2021, which accounted for around 68 percent of total revenue. Consequently, portfolio sales are currently still a rare but popular opportunity that finds affluent buyers. The high competitive pressure leads to an above-average price war in the bidding process.

Among the largest portfolio transactions in 2021 was the billion-dollar acquisition of the pan-European EQT/Exeter fund “Europe Value Venture Fund III” for a total of around 3.1 billion euros by the Asian sovereign wealth fund GIC (Singapore), of which about 20 percent was allocated to the German market, including properties in Berlin, Hanover, Paderborn, and Dortmund.

Additionally, in the middle of the year, the acquisition of the Clarion Portfolio, worth over 800 million euros, by the Canadian investor Dream Global took place, which also included some German assets. The Tristan Fund “Episo 5” secured various logistics properties in attractive locations alongside office and retail properties in the overall Summit Portfolio, which is worth over a billion.

The share of portfolios in the three-digit million range that took place in the German market in 2021 totaled around 2.4 billion euros by the end of the fourth quarter, accounting for a quarter of the total investment volume.

The largest single transaction of the year was made by Deka Immobilien with the acquisition of the Metawerk logistics park in Meerane (Saxony) for around 280 million euros. In addition, DWS Real Estate GmbH acquired the so-called Spectrum, a 95,000 square meter logistics property in Hamburg for around 189 million euros. A similar amount was also achieved with the acquisition of the “Log Plaza Brandenburg” in Großbeeren for around 160 million euros, contributing to a new record transaction volume (approximately 1.1 billion euros) in the Berlin/Brandenburg market. Several transactions over 50 million euros totaled a new all-time high, which also exhibited new record factors above 30 times the annual rent.

Prime Yield for Logistics Approaches the 3.0 Percent Mark

The high demand was evident not only in the above-average number of deals but also clearly in the price development over the last 12 months. As expected, the yield development continued to decline throughout the year due to a simultaneously limited supply, resulting in the gross prime yield for Class A logistics properties dropping from 3.70 percent at the beginning of the year to currently 3.25 percent, setting a new benchmark in the German market for industrial and logistics real estate.

“Throughout the year, we observed that investors see hardly any risks even with properties that have short lease terms, as long as they are in locations with projected rent growth. In this respect, short terms can rather be seen as an opportunity to increase the annual rental income of the property after the lease contracts expire. The new risk assessment is also confirmed in the purchase price factors, which are above 30 times and were achieved in numerous transactions over the last 12 months,” adds Roy.

In addition to classic logistics assets, investor demand for light industrial properties remains high, although due to a lack of available objects on the market, they again only account for a small share of the total investment volume (approximately 20 percent or 1.8 billion euros). Yield compression was also continuously evident here. For core properties located in the top investment centers, the prime yield now stands at 4.25 percent, 65 basis points below the previous year’s value. Among the most significant transactions in the light industrial sector at the end of the year was the acquisition of the 20-hectare Siemens Campus in Nuremberg by VGP, as well as the purchase of the “Sigma Technopark” in Augsburg for around 83 million euros by the joint venture Titanium, founded by AXA and Sirius.

Foreign Capital at Stable Levels

The share of foreign investors has stabilized at a similar level to the previous year by the end of the fourth quarter, with around 4.4 billion euros or 48 percent of the total transaction volume attributable to international capital providers. About half of this was generated through portfolio acquisitions, including the aforementioned acquisition of the Exeter portfolio by the Singapore sovereign wealth fund GIC. Investors from the UK, such as Tritax Eurobox, recorded a continued high market presence. The British logistics investor secured properties during the year, including in Bönen (118 million euros) and Gelsenkirchen (32 million euros), and also acquired the two logistics centers of Puma in Geiselwind (Bavaria) and Wayfair in Lich (Hesse) for a total of around 291 million euros via a share deal. Overall, the market share of British investors accounts for about 28 percent of the total international investment volume.

Outlook: High Market Activity Expected for 2022

“There is no doubt that interest in logistics real estate continues and remains at a very high level. Increasingly, more investment houses are focusing on logistics, so there is sufficient capital available that could be placed. Certainly, the transaction volume would have been significantly higher if more products had been available on the market. Investors who were unsuccessful in bidding processes are therefore under pressure to achieve their target allocations. Against this backdrop, we enter the new year with high expectations, which will also be characterized by continued yield compression,” concludes Roy.

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