German industrial deals fall 22% but appetite remains strong - Colliers

The volume of industrial and logistics real estate deals in Germany dropped by more than a fifth in the first six months of 2019, according to new research from Colliers.

 

The international advisory firm said that €2.5 bn of transactions took place in H1, constituting a fall of almost 22% year-on-year and an 11% fall compared to the five-year H1 average. Gross prime yields also fell to 4.35%, it said.

Industrial and logistics investment is currently experiencing a severe supply bottleneck, Colliers claimed. Demand for industrial properties remains high, with the asset class accounting for almost one third - around €769 mln - of the total transaction volume in H1.

Portfolio deals accounted for 38% - around €953 mln - of the total transaction volume, down from roughly 56% on last year. Only one high-volume portfolio deal was signed in Q2, which was a joint venture between British asset manager GreenOak Real Estate, Apeiron and a Korean investor, for three logistics properties in Eastern Bavaria, Karlsruhe and Dortmund, worth around €350 mln.

Yields fell another five basis points over the course of the first half of the year and may level off at slightly above 4% towards the end of the year, the research predicts.

Despite the subdued conditions, industrial and logistics properties in Germany remained popular with foreign investors in H1, accounting for €1.5 bn - or roughly 61% of the total transaction volume in H1 - similar to the previous year’s results. Investors from the UK (€796 mln) lead the pack by some distance, followed by Asia (€250 mln), the US (€197 mln) and France (€110 mln).

Meanwhile, the e-commerce boom means demand for German logistics assets continues to grow. The yield spread between office and logistics assets currently sits at just over 100 basis points, making industrial an attractive alternative.

Hubert Reck, head of industrial and logistics Investment at Colliers International Deutschland, said: ‘The bottleneck we are seeing when it comes to German logistics assets, particularly core and core-plus assets, is causing investors to turn to alternatives even if doing so entails higher risk.

‘We expect demand in this segment to rise over the next few years, particularly for light industrial assets, the majority of which are located in the vicinity of urban centres and are already becoming increasingly popular among investors.

‘High demand for core products continues to be confronted with very limited supply. An end to yield compression in the logistics sector is not yet in sight.’

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