The average prime yield for logistics assets in Germany has tightened 80 basis points since 2019, according to a recent study.
Advisory firm Catella studied 25 regions of Germany and also 5 in Austria together with data specialist, IndustrialPort.
They determined that the average prime yield in Germany has reached 4.05% while in Austria it has also fallen to 4.96%.
The most expensive location continues to be Berlin at 3.30%, followed by Munich standing at 3.50%. In comparison, the yield in Vienna region stands higher, currently at 4.20%. Nevertheless, it has also fallen in the last 2 years by 100 basis points.
With a focus on attractive return opportunities, only Würzburg (5.00%) in Germany offers a return on capital employed above the 4% mark, the study said. This is almost identical to the logistics regions of Linz (4.95%) and Salzburg (5.0%).
The average median rent of the 25 logistics regions surveyed in Germany rose to around €5.10 per m2 in the second quarter. Compared to 2019, this represents an increase of 2%.
The average top rent level in Austria is significantly higher at €5.34 per m2. However, it is striking that the Austrian price ranges show significantly less heterogeneity than the German regions.
Catella and IndustrialPort say over the next five years, additional logistics space demand of around 4 million m2 is expected in Germany and Austria, attributed solely to booming online retail.
Thomas Beyerle, head of research at Catella, said: ‘Investors are aware of the development in the logistics real estate market. This can also be confirmed by looking at the thematic logistics map for Germany and Austria. Logistics properties have once again experienced an enormous increase in demand, which is accompanied by a corresponding price rally and a sustained yield compression.’
Peter Salostowitz of IndustrialPort added: ‘These findings highlight the increasing need for a close examination of the location in terms of current and future use and the resulting rental development as well as the possibilities for follow-up leasing.’
The study points out that with the economic recovery picking up pace, full order books and the renewed bottleneck of international sea routes, sea freight rates are skyrocketing and causing supply bottlenecks.
Despite rising order books, production cannot pick up, which spotlights the vulnerability of the global supply chain. The situation is also worsening in construction, with hoarding and problems in the procurement of raw materials.
The quality-adjusted rents for production halls fell sharply by 12.9% last year, but dynamics in the previous years were also extraordinary, with rent increases of a remarkable 14-15% per year, the study said. A decline of 3.9% was also recorded in the warehouse sector, while logistics properties increased by 5.4%, a much stronger increase than in previous years.
Growing demand for logistics in Germany, not least by institutional investors, was reflected in record transaction volume of almost €8.3 bn in 2020. The first quarter of 2021 started strongly recording €1.8 bn. It could have been higher but for limited supply.