Logistics real estate seismograph: 27 percent less new logistics space in 2023

Last year, the volume of new construction in the logistics real estate market declined noticeably. After evaluating its own research data as part of the annual logistics real estate seismograph, the consultancy Logivest reports that construction will start on a total of around 3.8 million square meters of new logistics space in 2023 - around 1.4 million square meters and therefore almost 27% less than in 2022. While the first quarters are still above the million mark, the fourth quarter, with around 400,000 square meters, is significantly below the previous year, in which the weakest quarter since 2017 was recorded with around 700,000 square meters.

The three largest new logistics property developments of the past year were a 260,000 square meter owner-occupancy by Daimler Trucks in Halberstadt, a pre-let by GLP in Werder near Berlin of around 127,000 square meters to Sonepar and Welog, among others, and a speculative new building of a good 112,000 square meters by Thirteen Seven / BentallGreenOak in Estorf.

Cautious optimism about the future

"The overall economic environment in 2023 dealt a double blow to the construction of new logistics properties," says Kuno Neumeier, CEO of the Logivest Group. "Due to the weak economy and the new maximum rents, demand from tenants and owner-occupiers for new space was less pronounced than in previous years. This trend was exacerbated by the decline in online retail, which led some e-commerce companies to reduce previously built-up logistics overcapacity or postpone new construction projects. The second blow was the significant increase in financing costs compared to 2022, which made new developments more difficult for developers. Not only have financing costs risen, but in many cases it has been much more difficult to obtain financing at all due to the reluctance of banks."

However, Neumeier is more optimistic about the future: "Even if we are seeing a massive decline in new construction activity, I believe that we have bottomed out. We have a well-filled project pipeline for the coming years. Three million square meters of projected logistics space are already in concrete planning. The vacancy rate for existing properties is still low, although this may change in the medium term. This is because our logistics service provider exchange Logivisor.com currently shows a large amount of free capacity in managed warehouse space."

Julian Sommer, Commercial Director at DFI Real Estates, was also cautiously optimistic at the presentation of the study: "We assume that the environment for logistics project developers, which has recently recovered slightly, will continue to improve in 2024. We see that, in addition to the ecological aspect of sustainability, the social aspect is also becoming increasingly important - for municipalities, users and investors."

Nicholas Brinckmann, CEO of Hansainvest Real Assets, gave a decidedly positive analysis of the market situation on the same occasion: "After we had to act more cautiously in recent years due to the very high price level, the logistics real estate investment market has become very attractive again following the repricing and the resulting increase in acquisition yields. For investors, there is no way around ESG-compliant properties - and the topic is also becoming increasingly important for occupiers."

Largest growth in the Leipzig / Halle logistics region

The Leipzig / Halle region saw the most ground-breaking work in 2023, taking first place with a good 275,000 square meters. Hanover is in second place with around 250,000 square meters, which is more than double the figure for 2022. At that time, the region was only in 14th place. As in 2022, Berlin / Brandenburg came in third place - now with around 235,000 square meters. Bringing up the rear in 2023 with less than 25,000 square meters of new build space each were the regions of Munich, Koblenz, Saarland, Swabia and Erfurt. The trend over the past few years has been for large-scale projects in particular to move further and further to the edge of the logistics regions and beyond. There is still sufficient contiguous space there, which has become scarce, especially in the cities.

The Stuttgart region, for example, is one of the rising stars in 2023. An economically strong and sought-after logistics location, it has always ranked in the bottom third in recent years due to a lack of space and is in seventh place this year with around 180,000 square meters. Owner-occupiers such as Alfred Schuon, which is developing around 30,000 square meters in Wildberg, and Breuninger in particular have come to the fore here. The largest development in the region, however, at around 35,000 square meters, is a new logistics building speculatively constructed by P3 Logistic Parks on a brownfield site in Ebersbach, which has since been let to Lidl.

Growth also in Münster / Osnabrück

With a total result of around 185,000 square meters, the Münster / Osnabrück region climbed 15 places to sixth place. Two projects in Greven, among others, are decisive for the increase: firstly, the "Aconlog Park" in Greven, which was developed speculatively by Aconlog and Bauwo, is the largest project in the region with around 70,000 square meters and has now been let to the WM Group and Daimler Truck. The second is Alcaro Invest's "Log Plaza Greven", also developed on a speculative basis, which comprises almost 28,000 square meters and is let to the seed company FarmSaat and the logistics service provider Eva Logistics.

Rents for new builds range from five euros per square meter per month to 16 euros. "One of the factors that explain the regional differences is the price of land," explains Neumeier. The three most expensive markets are Munich (10.50 to 16.00 euros per square meter), Stuttgart (7.00 to 9.20 euros per square meter) and Hamburg (7.50 to 9.00 euros per square meter).

The future belongs to brownfields

For the first time, Logivest also recorded the developed and projected greenfield and brownfield sites. While greenfield space amounted to around 2.6 million square meters in 2023, brownfields accounted for less than half. However, a change is already emerging from 2024. Around 8 million square meters of projected greenfield space is then expected to be offset by around 5.5 million square meters of brownfield space. "We can see that brownfields are gaining in importance - because while around twice as much logistics space has been created on greenfields than on brownfields in recent years, the ratio will change in future. There is simply less and less greenfield space available in attractive locations. At the same time, greenfields are becoming increasingly difficult politically - both on a large scale at national level and on a small scale directly on site," explains Neumeier.

While an average of 55 hectares per day were still being built on across all uses in 2021, the German government aims to reduce land consumption to less than 30 hectares per day by 2030. At the same time, municipal decision-makers often struggle with new greenfield logistics developments, as they do not always meet with approval from their local electorate. Brownfields, on the other hand, do not involve the sealing of new land and are usually in prime locations that are ideal for logistics.

Demand for new-build space falls among logistics service providers

The sector that demanded the most new space in 2023 was the logistics service provider sector with around 970,000 sqm (around 71% less than in 2022). Automotive companies came in second place with around 590,000 square meters (up around 169%), closely followed by retail companies with a good 570,000 square meters (down 40%). A look at the well-filled project pipeline shows that from 2024, retail companies will potentially demand the most new space with a good 1.1 million square meters, followed by logistics service providers with around 845,000 square meters and automotive companies with around 460,000 square meters.

"While logistics service providers are currently acting rather cautiously and prefer to extend existing leases instead of relocating and expanding into new buildings, retail companies saw a very clear decline from 2022 to 2023. However, this should change again from 2024," says Neumeier. This temporary decline in the retail segment is not solely due to e-commerce companies, Logivest's figures show. Although demand for new-build space from online retailers fell by around 83% to around 115,000 square meters from 2022 to 2023, there was also a noticeable reduction in new-build space in the food and non-food segment of bricks-and-mortar retail and wholesale in 2023.

Outlook: Market potential available

The fact that the logistics real estate market has great potential despite this year's slump is also shown by the project pipeline, which is still well filled. "Although not every planned project will be implemented in 2024, we are talking about 12 to 13 million square meters of planned logistics real estate space, of which around three million square meters are already in concrete user negotiations," says Neumeier, adding: "In recent months, the financing costs for new buildings have already fallen noticeably again, so we expect the market to recover from the second half of 2024."

The three regions with the greatest potential are Leipzig / Halle and Duisburg / Lower Rhine (over 1 million square meters each) and Berlin / Brandenburg (over 750,000 square meters). In contrast, there is little potential for new construction in the logistics regions of Erfurt, Danube and Stuttgart (less than 250,000 square meters each).