July/August: Top Logistics Rents Rise for Years

July/August: Top Logistics Rents Rise for Years

Chart of the Month
01.07.2020 Author/s: Patrik Völtz

Breaking supply chains have a direct impact on production processes and thus on the entire global economy, as the corona crisis illustrates. However, logistics real estate is not only needed for stranded goods. Our current forecast shows: Top rents will continue to rise in the coming years - by up to eight percent in prime locations.

Digitisation has characterised the last two decades, among other things, by a high growth of online shopping activities and the e-commerce market. In addition to the changed consumer behavior of customers, a structural change around Industry 4.0 is also leading to changed requirements for logistics real estate. Without a functioning globalized supply chain, nothing works anymore, which is why demand, but also the lack of freely available warehouse space and land for new developments are equally high.

The already high demand has now been further strengthened by the desire for security.
The pandemic shows the tendency towards re-globalisation and the will to keep more stock close to the sales markets, because a secure supply chain is far more important than a cost-efficient supply chain, especially in the event of a crisis.

Our chart of the month shows how rising top rents are developing from rising demand with limited supply in the forecast. The reasons for this are, on the one hand, the scarce supply of both building land and rentable space; however, the competition for space with other types of use, such as residential and office use, must also be taken into account. On the other hand, rising land prices and realisation costs, especially due to increased brownfield developments and the associated costs, are a reason for the development of rental prices.

The forecast takes nominal values into account, with average rental growth of around two percent per year being assumed here. This applies across all location categories (A, B, C and D cities). It should be noted that data on logistics properties is usually collected, evaluated and published in spatial aggregates (logistics regions). In the forecast presented here, the city categories (A, B, C, D) are represented according to the bulwiengesa database RIWIS.

If the values are adjusted for inflation, i.e. real values are assumed, growth would only be between zero and one percent per year. The forecast therefore does not assume that rents will rise very sharply; rather, the growth in rents is based on a solid foundation, which has been observed in recent years and which also appears likely in the future.

Logistics space in well-connected locations in urban areas is a special feature, especially in metropolitan areas. This results from the desire of logistics and CEP service providers to get closer to the sales markets and thus to their target customers. It is therefore hardly surprising that prime rents in A-cities are rising much more strongly than in the other location categories: The forecast shows that average top rents for hall space in A-cities will rise by an average of 8% by 2024. Incidentally, as the results of the "Logistics and Real Estate" study series regularly show - the Berlin region (core city, surrounding area and interlinked area) and the logistics region of Hamburg have always had the highest top rents and the best fundamental data.

Contact: Patrik Völtz, head of studies at bulwiengesa, voeltz [at] bulwiengesa.de