June: Logistics yields at all-time low

June: Logistics yields at all-time low


Chart of the Month
01.06.2021 Author/s: Patrik Völtz

Yields for logistics properties will only rise minimally over the next few years, as our spring forecast shows - and that across all city categories and logistics regions. But the situation is not as clear-cut as the chart shows.

Investment activity in the Corona year has shown that among the commercial property types, logistics and corporate properties are in particularly high demand. Logistics properties were generally among the few winners of the pandemic. The systemic relevance of logistics became visible and the demand for logistics and warehouse space received an additional boost from the increasing market share of online trade.

bulwiengesa Chart of the Month June on Logistics Property Yields

Despite lower net initial yields, logistics and corporate real estate - in contrast to office or residential real estate, for example - still offer significantly higher yield potential outside of the A-locations. Here, regional market expertise is essential. Due to developments in the retail sector - an increase in e-commerce sales at the expense of bricks-and-mortar retail - demand for logistics space is expected to remain high in the coming years. Overall, the yield compression of the last few years will still have some effect.

This also becomes clear in the individual analysis of the A-cities and the logistics regions of Berlin and Munich, which currently have the lowest yield levels. In individual transactions, yields far below the stated level of 3.6% and 3.7% are also accepted. In these two logistics regions, yields have fallen by 1.75 and 1.80 percentage points respectively in the past five years. What this means in concrete terms is illustrated by a representation of the capital values in a time comparison: they rose (due to falling yields and rising rents) in Munich from around 1,280 euros/sqm in 2015 to currently around 2,100 euros/sqm.

However, yield compression is not only taking place in the A-markets, but in all logistics regions. The Nuremberg and Rhine-Ruhr regions are recording the most significant declines. The high demand - with low supply at the same time - in the top locations is moving regions with potential such as A4 Saxony or Münster/Osnabrück into the focus of investors.

 

Note: We will be happy to send you the PDF "Market Knowledge Forecast Logistics Spring 2021" with further information on the key figures of the logistics property market, among other things, on request.

As always, detailed and regionally differentiated data as well as the respective forecasts for the other asset classes can be found in RIWIS. You can request a test account at riwis [at] bulwiengesa.de.

Contact person: Patrik Völtz, Senior Consultant Industrial and Logistics Real Estate, voeltz [at] bulwiengesa.de