The market for logistics property continues to boom. According to Bulwiengesa, prime rents on logistics space across the top six cities rose by an average of approximately 10% between 2017 and 2020. They even increased further in 2020, a year that also witnessed the second highest nationwide take-up total of all time.

While demand has (temporarily) declined in the mechanical engineering and automotive sectors, the chemical, pharmaceutical and healthcare sectors have registered increased demand. However, e-commerce has been and remains a key driver of the rising rents and high take-up and e-commerce companies will require significantly more space going forward. European take-up from parcel logistics operators is likely to increase by approximately 55% by 2025.

In view of the temporary border closures during the first wave of the pandemic and the recent blockade of the Suez Canal, there is also a growing acceptance that larger buffers in the logistics chains would be sensible. This could also increase demand for warehouse space in other sectors.
However, in view of technological innovations, there are also risks in terms of demand for space. One example is the trend towards electromobility, which particularly entails risks for the production and logistics space requirements of some automotive suppliers. In the long term, improvements in 3D printing could also reduce logistics requirements or at least result in noticeable changes in supply chains. How strongly and in which form these changes will manifest themselves remains to be seen.

On the whole, however, most projections expect growing logistics and transport requirements over the coming years. As one of the central hubs of the European logistics network, Germany will play a decisive role in this development. Hence, land values and rents in locations near major transport routes and in last-mile locations are likely to increase.

Real estate investors have also become increasingly attentive to the growing demand for warehousing and logistics space. Industrial and logistics property in Germany changed hands for approximately €7.2bn last year, which was around 1% higher than in the previous year. Approximately 12% of the overall transaction volume for commercial property in 2020 was attributable to industrial and logistics property. In the first quarter of 2021, this proportion rose further to 18%. The recent equivalent worldwide figure was even as high as around a third of the overall commercial transaction volume.

Owing to the very high and rising investor demand, it can be assumed that the importance of logistics property in the German real estate investment market will continue to grow. Yields are also trending in this direction. The prime yield in Germany since the outbreak of the pandemic has hardened by approximately 20 basis points and stood at 3.5% at the end of March 2021. We expect further yield compression in the current year. This illustrates that logistics property has long been regarded as core product and is featuring on the wish lists of more and more risk-averse investors.

However, it is not only investors in large logistics warehouses that will have to deal with further developments in the sector. For owners of city-centre properties, logistics could be a potential alternative use for vacant retail space. Grocery delivery operators such as Gorillas and Flink use dark stores as decentral city-centre delivery warehouses. Hence, logistics is likely to be the talk of the real estate market more than ever going forward.