BNP Paribas Reports Record Investment in Logistics Real Estate

It is no longer a secret that the logistics markets have developed very strongly despite the Corona pandemic and are among the winners. With a record turnover of 9 million m² (including owner-occupiers) achieved in 2021, they are entering a new, previously unknown dimension. This surpasses the previous year’s result by 32% and the ten-year average by a remarkable 40%. This is the analysis from BNP Paribas Real Estate.

“Just how extraordinary the result is becomes evident especially in that even the previous record from 2018 was topped by 22%. To achieve such a result, many factors must come together that drive demand. These include the continuing boom in e-commerce, as well as the reorganization of supply chains due to bottlenecks with pre-products or restructuring processes in the industry, such as e-mobility. A significant expansion of new construction activities has also helped, which has somewhat alleviated the supply bottleneck, even though there is still too little space available in most regions,” explains Christopher Raabe, Managing Director and Head of Logistics & Industrial at BNP Paribas Real Estate GmbH.

All logistics hubs have seen growth

The breadth of the increase in demand is evident in that all major logistics hubs were able to increase their revenues. The space turnover of €3.76 million corresponds to an increase of 56%. This also represents a new all-time high; never before has the 3 million m² mark been surpassed. In total, four markets (Berlin, Frankfurt, Cologne, Leipzig) set new records. Frankfurt has taken the lead, where the previous year’s value more than doubled (875,000 m²; +108%). Following in the ranks are Hamburg (641,000 m²; +31%), Berlin (609,000 m²; +41%), and Leipzig (505,000 m²; +50%). Düsseldorf shows the strongest increase with 303,000 m² (+109%). However, Munich (347,000 m²; +46%), Cologne (334,000 m²; +55%), and Stuttgart (148,000 m²; +7%) also saw significant revenue increases.

Very high revenues are also observed outside the major logistics hubs. In total, nearly 5.3 million m² of logistics space was transacted here, representing an increase of 20% and expectedly setting a new record. The revenue increase of 2% in the Ruhr area seems relatively modest. This is due to the excellent previous year’s result. Nevertheless, this achieved the second-best result of all time. The 12 logistics regions that BNPPRE regularly analyzes in addition to the metropolitan areas were also able to increase their revenue by over 22% to more than 1.6 million m².

The supply situation remains tense in many logistics regions. Although the stronger new construction activity throughout the year has temporarily expanded the supply somewhat, the fundamental supply-and-demand relationship has not changed due to high demand. However, at least enough new product has been created so that the share of new construction in the overall result remains at nearly 65% at a long-term level, despite a significantly increased turnover. The situation is different for owner-occupiers. Their share has reached around 26%, the lowest value in the last ten years. Rising construction costs and land prices, combined with a very low land supply in commercial areas, often make it difficult for them to implement their plans. At the same time, the increasingly available brownfield sites are often both too expensive and too complex for owner-occupiers to prepare.

Rents have noticeably increased

It is pleasing that all major industry groups have contributed significantly to the excellent result. The largest revenue contribution comes from logistics service providers, accounting for 39%, who set a new record with 3.5 million m² and for the first time surpass the 3 million m² threshold. The situation is similar for retail companies, who narrowly take second place with about 36%. They also absorb 3.24 million m², the most space ever within a year, and also break the 3 million m² mark for the first time. Completing the leading trio are manufacturing companies, which account for almost 20% and thus remain relatively below their ten-year average. Nevertheless, nearly 1.8 million m² represents a very good result.

The strong demand combined with rising construction costs has led to noticeable rent increases in almost all markets compared to the previous year. On average, the prime rent has increased by over 3%. The strongest increases were recorded in Munich (€7.50/m²; +7%) as well as Berlin (€7.50/m²) and Hamburg (€6.55/m²), where they each rose by around 4%. For average rents, the increase was even higher, averaging nearly 4%. Here, Cologne with around 8% and Leipzig and Berlin with over 5% each show the most dynamic development.

High demand expected for 2022

“For the year 2022, a very high demand and well above-average space revenues are also expected. On the one hand, this is supported by the outlined industry trends, which will last longer and provide additional demand impulses, and on the other hand, by the economic recovery, which will likely accelerate during the year. The limiting factor will remain the supply, which could only partially or temporarily offset the demand increases by incorporating even more brownfield developments. Against this background, everything points to a further increase in rent levels from today’s perspective,” summarizes Bastian Hafner, Head of Logistics & Industrial Advisory at BNP Paribas Real Estate GmbH, the outlook.

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