NAI apollo: Market for warehouse and logistics space in the Rhine-Main area achieves record result in 2017

• Annual space take-up volume of 769,000 sqm signals new record

• Peak result of 2014 exceeded by 16,000 sqm

• Large deals at all-time high

• Rentals in current project developments strongly increase in importance

• Outlook: In view of contracts that are about to be signed, high demand and positive market sentiment, an above-average result is expected for 2018

Frankfurt am Main, 24.01.2018 – In 2017, space take-up by tenants and owner-occupiers on the market for warehouse and logistics space in the Rhine-Main area reached about 769,000 sqm. According to an analysis by owner-managed real estate consultancy NAI apollo – partner of the NAI apollo group – this result not only surpassed the 700,000-sqm threshold for the second time but also exceeded the 2014 record figure by 16,000 sqm.

58 % of take-up generated by large deals

The high take-up of space in 2017 was based to a large extent on a bigger proportion of deals for more than 10,000 sqm. Within this size category, a volume of 445,000 sqm was generated throughout the year, representing the highest value for this cluster since NAI apollo began compiling data. Compared to the previous year, this segment grew by 64.9 %. “This development was particularly caused by the increased requirement for space on the part of logistics service providers and retail companies, primarily as a result of the e-commerce boom. Demand remains high and continues to rise, especially for warehouses larger than 5,000 sqm,” said Dr. Konrad Kanzler, Head of Research at the NAI apollo group. In terms of the different industries in 2017, transport, warehouse and logistics service providers accounted for a take-up volume of about 326,000 sqm. This corresponds to a share of 42.4 %. The trade industry was next with 239,000 sqm, followed by industrial companies with 121,000 sqm. These two industries accounted for shares of 31.1 % and 15.7 % respectively. The transport, warehouse and logistics industry also registered the biggest increase in take-up with year-on-year growth of 40.1 %.

NAI apollo advised on major lease contract

The largest contracts in 2017 included a 43,000 sqm space leased by a contract logistics provider in Trebur as well as the lease by an online retailer of a 35,000sqm warehouse on the former Südzucker site in Groß-Gerau.

“Further large lease contract signings were also undertaken by Bosch Thermotechnik GmbH in Butzbach with 34,000 sqm and the Rossmann drugstore chain in Bürstadt for more than 33,000 sqm. NAI apollo advised on the latter deal,” said Michael Weyrauch, Head of Industrial Letting and Transaction at NAI apollo.

Project developments increasingly important in terms of large lettings

In an analysis of the different forms of rented space, rentals in existing buildings account for the largest proportion of take-up with a slightly higher share of 47.5 % compared to the previous year (45.1 %). At the same time, lease contracts for spaces in current project developments are playing an increasingly bigger role. “In absolute terms, take-up in this segment increased by 143,000 sqm or 80.9 % to about 320,000 sqm. This corresponds to a take-up share of 41.6 %, amounting to an increase of 13.7 percentage points. The large lease contracts mentioned above contributed significantly towards this growth,” said Dr. Konrad Kanzler. In contrast to this development, there was a decline in owner-occupier projects and purchases by owner-occupiers. By the end of 2017, these categories accounted for a combined share of take-up amounting to 10.9 % (2016: 27.1 %).

Southwest still the focus of market activity

There were no significant changes in the geographical distribution of take-up compared to 2016. The southwest sub-market, situated between the river Main and the A5 and A63 motorways, played a dominant role with a take-up share of 42.6 % or about 327,000 sqm, largely owing to several major contract signings such as in Trebur or Groß-Gerau. The southeast and east market areas followed suit with shares of 16.0 % and 10.7 % respectively.

Economic situation and industry sentiment raise expectations of a strong 2018

The prospects also look bright for a further positive development of the warehouse and logistics market in the Rhine-Main area during 2018. Contract preparations already in place at the end of 2017 suggested the year would get off to a good start, according to NAI apollo. For 2018 as a whole, space-take-up is again expected to far exceed the ten-year average; owing to the record result in 2017 this figure has increased to 552,000 sqm. “In 2018, the former Südzucker site in Groß-Gerau, the former air base in Erlensee and the former Mitsubishi site in Trebur are expected to see an increase in market activity. The first pre-lettings in 2017 contributed to the largest deals in terms of size in the previous year,” added Michael Weyrauch. Also worth mentioning are new projects in areas such as Gernsheim and Egelsbach, as well as the various developments by SEGRO, as they are creating new, large-scale logistics areas and industrial parks in the region on a (partly) speculative basis.