NAI apollo real estate: Logistics property letting market in Frankfurt/Rhine-Main remains well below previous year in Q1

• Logistics property lettings market makes moderate start to the year with space take-up of 115,000 sqm
• Logistics company MES signs largest deal with 14,000 sqm
• Lettings in existing buildings and new developments dominate the market; owner-occupier projects yet to play a significant role
• South market area again accounts for largest take-up share, but East sub-market makes gains
• Outlook: Annual take-up expected to be in line with long-term average of 520,000 sqm

Frankfurt am Main, 28.04.2017 – According to an analysis by owner-managed real estate consultancy NAI apollo real estate — partner of the NAI apollo group — the market for logistics and warehouse space in the Rhine-Main region started 2017 with a moderate result. Take-up by owner-occupiers and tenants reached around 115,000 sqm. This represents an almost 42 % decrease from the previous year and is also 3,000 sqm below the level from the previous quarter (Q4: 118,000 sqm).

Absence of large deals causes take-up to fall
"A major reason for this decline is the absence of significant large deals. Last year, the largest lease contract involved 83,000 sqm and was signed by retailer Action with NAI apollo real estate acting as agent. In the past three months the largest contract, signed by logistics company MES, was significantly smaller in comparison with only 14,000 sqm in Eppertshausen," said Michael Weyrauch, Head of Industrial Letting and Transaction at NAI apollo real estate. The next-largest deals included the expansion by 12,500 sqm of the Segro logistics centre for B+S in Alzenau and the leases signed by Hennig Fahrzeugteile in Weiterstadt (11,000 sqm), 4PX Express in Ginsheim-Gustavsburg (9,300 sqm) and Dachser in Erlensee (8,500 sqm). All the latter transactions took place in (partly) speculative project developments or recently completed building projects.

"Thus there is a complete absence of deals above 14,000 sqm in the year to date. However, contracts in the segment above 5,000 sqm account for a 61.7 % share or 71,000 sqm," said Dr. Konrad Kanzler, Head of Research at NAI apollo group.

Owner-occupier projects play less important role
In terms of the different forms of take-up, leases in existing buildings accounted for the largest share of approximately 76,000 sqm or 66.1 %. This was significantly higher than the 45.1 % share registered at the end of 2016. Lease contracts in ongoing project developments were broadly in line with the previous year at 26.4 % (2016: 27.9 % share). In contrast, building projects by owner-occupiers clearly lost ground with no new projects started in the first quarter of 2017. "The previous year's trend, caused by a shortage of space and long implementation periods, has therefore continued into the current year," added Michael Weyrauch. Purchases by owner-occupiers account for around 9,000 sqm in total, and correspond to a continuing high share of 7.4 %.

Storage and logistics companies back in driving seat
The traditionally strong South remained the most important sub-market with total take-up of about 66,000 sqm. At the same time, its share dropped to 57.6 % (2016: 67.0 %) after losing some ground to the East sub-market, which achieved a 28.5 % share primarily because of the lease contracts signed by B+S and Dachser.

The analysis of take-up by logistics space users reveals a well-known distribution. After the retail sector made strong gains in 2016 following the lease contract signed by Action, transport, storage and logistics companies resumed their usual dominant position at the start of 2017, achieving a 46.3 % share of take-up and firmly relegating retail to second place (25.9 %).

Positive outlook based on expected large contract signings
NAI apollo expects market activity to pick up in the coming months because of anticipated large contract signings. "Thus we can predict that take-up will again reach the 10-year average of 520,000 sqm by the end of the year," said Dr. Konrad Kanzler.

Larger new spaces are available following last year's completion of CENTRA5LPARK in Weiterstadt as well as in the Dietz logistics centre in Raunheim. Further large-scale completions will take place this summer with (partly) speculative project developments on the Mönchhof site (expansion of the "Multipark" development as well as building projects by Kolb Red Logistik) and the VGP-Park in Ginsheim-Gustavsburg. "A total of 70,000 sqm is still available for rent at short notice in these developments," said Michael Weyrauch. In addition, construction work is about to start on the first building phase of the M-Port³ project development — also on the Mönchhof site — and the new Segro logistics park in Bischofsheim with a combined 45,000 sqm of warehouse space, which is being built on a speculative basis.