Supply bottleneck limits German logistics transactions

Germany's logistics real estate market recorded a comparatively modest start to the year, according to new research from Colliers International, with only €1.1 bn invested into German industrial and logistics assets in Q1 2019, down 38% year-on-year and a drop of 10% on the 5-year Q1 average. 

Nevertheless, the sector once again emerged as the third strongest commercial asset type, with a market share of 10%, the advisory firm said.

'The industrial and logistics asset class has become an important pillar of the German investment market as reflected by consistent double-digit market shares over the past several years,' said Hubert Reck, head of industrial & logistics investment at Colliers International Deutschland.

'Potential demand on the current seller’s market is being offset by limited supply of both stock and new-build assets, which is putting the brakes on transaction volume,' Reck added.

Demand for industrial assets in particular remains high. Industrial assets accounted for around one third, or €357 mln, of total transaction volume in Q1 alone. Notable deals included the Titanium joint venture between AXA Investment Managers and Sirius Real Estate, with AXA acquiring a 65% share in five Sirius business Parks (total value of around €168 mln) in Berlin, Mainz, Nuremberg and Bayreuth.

However, there was an absence of high-volume deals over €300 mln, according to the research, with portfolio deals claiming only €613 mln, or 54%, of total Q1 transaction volume. Barings and Tristan’s joint acquisition of 25 German and Danish cold storage properties from the Nagel Group was among the largest deals in Q1. The purchase price for the portfolio, which comprises 260,000 m2 of rental space, is estimated at over €250 mln.

As in the previous year, German investors outperformed foreign investors, generating just under 54%, or €603 mln, of the overall result. Investors from the UK (around €203 mln), the US (around €178 mln) and France (around €112 mln) were particularly active in the first two months of the year, while Asian investors were relatively reserved.

'There is no end in sight for yield compression in 2019. Based on current purchase price negotiations, we expect prime gross yields for latest-generation logistics assets with standard lease terms of 10 years and strong-covenant tenants to continue to drop over the course of the year,' said Reck. 'We are very optimistic about the remainder of the year despite the ongoing supply bottleneck,' he concluded.

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