Nationwide take-up of logistics and light industrial premises in Germany in the first three quarters of 2012 totalled around 3.6 million m². Although that was about 23% down on the prior-year period, it is nevertheless a good or even very good result. This is revealed by a survey conducted by BNP Paribas Real Estate (BNPPRE).
“The record performance in 2011 had featured a very large number of major deals, on a scale that was unlikely to be repeated. In fact, take-up so far represents the second-best result of the past five years. So market activity can still be described as dynamic overall, with only few signs of uncertainty in connection with the ongoing crisis over the euro,” says Hans-Jürgen Hoffmann, Head of Industrial Investment & Services at BNP Paribas Real Estate. Turnover in the chief German locations (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Leipzig and Munich) totalled 1.57 million m², slightly more than 30% lower than in the first nine months of last year. Outside these main centres, the year-on-year downturn – at around 17% – was considerably less marked, with aggregate take-up coming to 2.03 million m².
The downturn affected all the key centres. Düsseldorf suffered least, with a drop of only just under 8%, this was thanks mainly to a contract for premises of over 70,000 m² concluded by Zalando in Mönchengladbach, which forms part of the Düsseldorf market area. Relatively good performances were also registered by Berlin, with 267,000 m² (-16%), and Munich, with 191,000 m² (-26.5%). The biggest fall was that posted in Cologne, where turnover declined by 58.5% to 76,000 m². The declines in the markets in Hamburg (425,000 m²), Leipzig (139,000 m²) and Frankfurt (279,000 m²) ranged between 30% and 38%, roughly in line with the inter-city average.
Hardly any mega-deals
Unlike last year, there have been hardly any mega-deals. The only exception was the 70,000 m² Zalando contract in Mönchengladbach; this was the biggest deal recorded so far this year. However, outside the main locations, contracts for premises of over 20,000 m² represented the best-performing size class, accounting for 43% of all take-up. In contrast, in the main cities distribution by size was relatively uniform.
At the end of the third quarter, the distribution of take-up according to business sectors presented a picture similar to that evident during the earlier part of the year, with turnover still spread fairly evenly between the three main sources of demand. With a share of just under 38%, logistics firms remain in first place. Then, more or less equal, come industrial and manufacturing companies (28.5%) and wholesale/retail (just over 27%).
All the other sectors play only a subordinate role. This stable and balanced distribution of demand is one significant reason for the very good result, which stands up well to long-term comparison. Although some sectors may be suffering the negative repercussions of the euro crisis and the current economic slowdown, the impact is offset to a certain extent by other branches of the economy. Something similar holds true in wholesale/retail, where new trends, e.g. e-commerce, are generating additional demand and at least in part compensating for the general stagnation in consumer expenditure. So the signs suggest that demand in the fourth quarter will remain lively.
Top rents stable
In spite of the combination of strong demand and a reduced supply of modern logistics premises, top rents have done no more than to go on firming up at their previous level. There are two reasons for this. For a start, top rents have now reached a reasonable level by long-term standards; secondly, tenants are showing only very limited readiness to accept higher rental prices, with the still evident uneasiness regarding the future of the euro playing an important role in this connection.
The rental price ranking is again headed by Frankfurt and Munich, both of which have top rents of 6.20 €/m². Then come Hamburg, with 5.60 €/m², Düsseldorf, with 5.10 €/m², Cologne, with 4.80 €/m², and Berlin, with 4.70 €/m². At the bottom of the scale, as before, are the Leipzig market area, with a top rent of 4.25 €/m², and the Ruhr Region, with 4.20 €/m². However, the shortage of space is prompting a trend towards lowering the extent of incentives, so that the average effective rents now being obtained actually reveal a modest upward tendency.
Outlook
“Demand during the rest of this year looks set to remain at the level registered in the first nine months. So up to now the effects of the weakening economy have been held in check and are reflected primarily by longer periods of negotiation over new lease contracts. Whether or not the anticipated decline in economic growth will result in a fall in turnover in the first half of 2013, in particular in the rental markets, remains to be seen. At any rate, though, with the economy still generally stable, there are no indications that any marked slumps are likely,” says Hans-Jürgen Hoffmann.