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The logistics and industrial real estate market in Germany, while experiencing selective hesitation from investors, is proving resilient, according to the recently published "Logistics and Real Estate 2024" study by bulwiengesa in collaboration with BREMER, GARBE, and Savills.
The report, assessing over 3,000 logistics properties under development or already constructed, shows that this asset class remains a leader among commercial property types in Germany. Although the market has entered a stabilisation phase following years of rapid growth, it continues to perform strongly in key areas, especially compared to more troubled sectors like office and retail. "Despite economic challenges, logistics has consistently weathered crises well," notes Malte-Maria Münchow of Logix, emphasizing that vacancy rates are "between 0% and 3% across established markets," a level of stability unseen in other commercial sectors. In fact, Germany’s total logistics completion volume is expected to reach 5 million sqm this year, a slight increase over last year’s 4.8 million sqm, with strong expectations for continued high production levels.
Regionally, the Rhine-Ruhr and Berlin areas rank at the top for logistics property performance, with increased interest noted in the Halle/Leipzig region. Hamburg, Rhine-Main/Frankfurt, and Cologne, once dominant logistics hubs, are gradually declining in ranking, illustrating shifting location preferences among investors. Savills reports that 27% of investments between 2019 and 2023 occurred outside established logistics regions—a figure that has recently dropped to 18%. This shift, according to Savills' Diana Schumann, reflects financiers’ renewed emphasis on key locations despite continued construction in various parts of Germany. "It’s clear that location is once again crucial," says Schumann, as companies and investors look to minimize exposure to less strategically located sites.
Investor caution is clear in the first half of 2024. JLL notes that while logistics investments reached approximately €3.4 billion in H1 2024—a 60% year-over-year increase—total volume remains 6% below the five-year average. Schumann adds, "Large transactions are increasing, with twelve deals over €100 million this year compared to just two last year," as major fund managers seek stability by diversifying portfolios with logistics investments. This trend is evident among international investors as well, who accounted for more than two-thirds of logistics acquisitions and 43% of sales in Germany in H1 2024. LIP Invest’s Managing Director Bodo Hollung acknowledges the delays caused by high financing costs but views the current market as providing a solid entry point: "With favorable conditions in sight, there’s ample opportunity for serious investors," he explains.
New-build vs. existing properties, brownfield vs. greenfield
New builds are central to development plans, yet increasing attention is paid to existing properties with stable long-term leases. HIH Invest, traditionally focused on core and core-plus properties, is now expanding into value-add investments, says Lars Hendrik Bothe of HIH Invest. "Properties no longer meeting the latest standards are under pressure to invest," Bothe explains, particularly given the trend toward automation, which Michael Dufhues, CEO of BREMER, says has led logistics facilities to be developed "around high-tech equipment rather than standard designs." This shift is essential as developers face new ESG and automation requirements, adding complexity and cost to standard logistics developments.
Meanwhile, brownfield sites have taken on new importance. Logivest’s recent data reveal that 38% of new logistics developments in the first half of 2024 were on brownfield land, a 6% increase from 2023. "Sustainable options that reduce land consumption are gaining ground," says Kuno Neumeier, CEO of Logivest, adding that former industrial sites often provide infrastructure benefits, such as grid connections suitable for EV charging. Major brownfield projects include Prologis’s development in Bottrop and Mercedes-Benz’s logistics center in Bischweier on a former chipboard factory site. This shift is expected to gain momentum as Germany enforces stricter greenfield development limits by 2050.
Despite the inherent complexities, bulwiengesa’s Felix Werner and Daniel Sopka emphasise that brownfield revitalization is an attractive route for sustainable expansion in regions like Rhineland and Lower Saxony, where high construction activity has led to occasional overcapacity. "We’re still uncovering the full potential of brownfield sites," notes Werner, with about 5.5 million sqm expected to become available gradually as regions focus on sustainable development options.
Mid-year overview and foreign investor sentiment
Despite cautious investor behavior, logistics properties recorded the highest investment volume among all commercial asset classes in Germany during H1 2024, with a total of €2.7 billion according to bulwiengesa. The market’s performance is buoyed by the ongoing need for logistics infrastructure, driven by e-commerce growth, nearshoring, and evolving supply chains. "E-commerce and nearshoring remain solid drivers," emphasises Nicolas Roy of Colliers, who notes that Germany’s strategic location in the EU is attracting companies from Asia seeking closer proximity to European markets. For example, Taiwanese tech firm Quanta Computers recently established operations in Jülich, underscoring the appeal of German logistics facilities as supply chains regionalise.
Blackstone’s recent €1.1 billion acquisition of Burstone’s portfolio exemplifies this foreign interest. Blackstone’s James Seppala views logistics real estate as a "core investment theme" with long-term growth potential fueled by structural demand drivers like e-commerce and low vacancy rates. This deal, giving Blackstone an 80% stake in Burstone’s high-quality properties across Germany and other European markets, positions it well for continued expansion amid strong tenant demand.
Rental rates and yield expectations
Rental growth has been robust but appears to be plateauing. JLL reports that prime rents increased by 24% to 67% across key markets over the past five years, but this trend is slowing in 2024. Sarina Schekahn, Head of Industrial & Logistics at JLL Germany, warns that further rent declines may occur, especially in overbuilt C-locations: "With higher rents, companies are often extending leases rather than relocating," she notes. Vacancy rates are low, supporting demand stability, while Colliers’ Nicolas Roy reports prime gross yields for core logistics properties at 4.75%, alongside yield factors between 20 and 22 for premium properties.
Schekahn also points out a trend of subletting in response to high rental rates. "Users are subletting ‘grey space’ at rates lower than current rents for new developments," she adds, reflecting a shift towards efficiency and cost-saving. Martin Leinemann of Arbireo Capital emphasises the opportunity in adapting single-tenant spaces to multi-tenant business parks and city logistics hubs, often requiring sustainable energy upgrades to meet new standards.
In summary, Germany’s logistics real estate market remains robust, underpinned by e-commerce demand, nearshoring, and a shift toward modern storage solutions. Strategic moves like Blackstone’s high-stakes acquisition of Burstone’s portfolio underscore the enduring investor appetite for logistics assets, even amid broader economic caution. With the increasing shift to brownfield redevelopment and rising standards around ESG and automation, the logistics sector is positioned as a core asset class that shows no sign of slowing, poised for further growth in Germany’s key locations.
