NAI apollo: warehouse and logistics property market in Rhine-Main region off to a slow start in 2020
Frankfurt am Main, 22. April 2020 – The warehousing and logistics real estate market in the Rhine-Main region got off to a very slow start in 2020, according to an analysis by the owner-operated real estate consultancy firm, NAI apollo. The analysis shows that space take-up by tenants and owner-occupiers amounted to nearly 91,000 square metres in the first three months of the year. “This means the start of 2020 marks one of the weakest take-up totals of the last ten years. These results are 47,000 square metres, or 34 percent, below the figures for the same period last year. However, the last quarter 2019 saw an even lower volume at 74,000 square metres,” says Dr Konrad Kanzler, Head of Research at the NAI apollo group. This also represents a continuation of the trend of minimal market activity.
COVID-19: Little influence at begin of year
The current result is primarily due to a lack of space that satisfies the respective needs of the users, as well as the economic downturn, although this did show some signs of stabilising at the beginning of the year. “A general ease-up in the market is also an important aspect to mention – a factor that began in 2019 after many years of new record levels. Possible effects of the COVID-19 pandemic did not materialise until the end of the first quarter, which means they are of secondary importance with regard to the current take-up results,” explains Michael Weyrauch, Head of Industrial Letting and Transaction at NAI apollo. Current consequences of the pandemic are most visible when observing tenants and lessors, who seem to be biding their time. Additionally, new leasing activities are currently subject to tight restrictions due to the ongoing lockdown.
Large-scale leasing dominates market activities
By agreeing a leasing contract in a project development in the Limes inter-district business park, an online retailer has had a significant impact on the current quarterly results. The deal, which was finalised at the turn of the year and credited to the year 2020, is not just the only deal for a space of more than 10,000 square metres, but also represents almost 45 percent of the quarterly results with a total of 42,000 square metres of hall space. “Without this deal, the take-up results would have dropped below 50,000 square metres,” Kanzler states. The second strongest segment covers small spaces of less than 1,500 square metres, which add up to a total of 18,000 square metres. All other segments recorded take-ups between 9,000 and 12,000 square metres. Leasing has declined without exception across all segments compared to the first quarter of the previous year, with declines ranging between 22 percent and 45 percent.
Retail trade the strongest user group; industry/commercial enterprises lead in small space segment
Due to its considerable market significance, the major deal with the Limes business park affects a majority of aspects of market activities. For example, the North-East sub-market saw the strongest take-up in the first quarter with a market share of 47.3 percent. This segment is followed by the traditionally strong South sub-market (23.1 percent), which continues to lead the number of deals with a share of nearly 42 percent. A break-down by sector sees a lion’s share – 55.2 percent – going to the retail trade as a result of the large-scale leasing deal. The transportation, warehousing and logistics sector follows with 22.2 percent, ahead of the industry/commercial enterprises segment (14.3 percent). “However, the latter group represents the most important user group in terms of smaller warehousing and logistics spaces of up to 1,500 square metres, with a corresponding take-up share of over 40 percent,” Weyrauch emphasises.
Impact of COVID-19 on warehouse and logistics market unclear
The development of the warehouse and logistics market in the Frankfurt/Rhine-Main region in the coming months is currently very difficult to predict due to the COVID-19 pandemic and its social and economic consequences. At this time, problems with cross-border traffic, the drop in consumption in the traditional retail trade and the dramatic slump in sales in the automotive sector are certainly having a negative effect. “However, in the medium term, there is a good chance that the warehouse and logistics sector will not suffer from the COVID-19 crisis to the extent of other commercial asset classes. It could even emerge as one of the beneficiaries,” says Kanzler. “Along with the current high requirement for space by the food retail trade, increased demand for warehouse, distribution and shipping centres can be expected, particularly by online retailers,” adds Weyrauch. “In addition, demand for general storage options or supplementary warehouses by industry and the retail trade may well increase to help prevent future delivery bottlenecks.”