Investment in Germany's logistics property sector fell by 28% in 2018 but remains above the five-year average, according to a report by Savills.
The total transaction volume was approximately €6.7 bn, in line with expectations, amid signs that the economy may be poised for a downturn.
Savills said a slackening of foreign trade was the main source of concern, although the growth of online retail is continuing to drive growth in the logistics sector.
Yield compression is expected to ease off as rents increase in core locations, as developers are no longer able to reclaim rising land and construction costs through higher exit multipliers. Last year the prime yield tightened by 50 basis points to 4.2%, while average yields were down by 30 basis points at 5.3%.
The seven major German industrial cities accounted for 43% of the total transaction volume, amounting to €2.9 bn, in 2018 and will continue to dominate the market, said Savills. Three German-based deals – the Visio in Munich, the Kodak site in Stuttgart and the Clinton headquarters near Berlin featured among the top 20 transactions last year, contributing to a total volume of €735 mln.
Demand remains strong for large warehouses and newbuild facilities, said Peter Salostowitz, managing director of consultancy firm IndustrialPort, which analyses the logistics and industrial sector in partnership with Savills. 'Demand for properties in excess of 5,000 m2 is growing. Transport companies are providing significant impetus and absorbing most of the space. Furthermore, demand for newbuild developments is on the rise, since these are more efficient than existing properties in terms of both space and energy and are hence more economic to run.'
Bertrand Ehm, director of industrial investment for Savills in Germany, said: 'Many institutional investors will be looking to increase the proportion of logistics property in their portfolios this year, suggesting that 2019 will also witness an above-average transaction volume.'
“Overall, we are continuing to see the sector gain relevance in the institutional investment market with investors continuing to focus on the top seven logistics regions in Germany,' added Matti Schenk, senior consultant researcher for Germany.