NAI apollo: Warehouse and logistics space market in the Rhine-Main area continues to show below-average activity

Frankfurt am Main, 22nd October 2019 – An upturn on the market for warehouse and logistics space in the Rhine-Main area still failed to materialise in the third quarter of 2019, according to the latest analysis by owner-managed real estate consultancy NAI apollo. The market even recorded a slight decline following its already somewhat moderate performance in the first half of the year. In the first nine months, space take-up by tenants and owner-occupiers amounted to around 404,000 sqm. Of this, the third quarter accounted for 127,000 sqm compared to 138,000 sqm and 139,000 sqm in the two first quarters of the year. 

NAI apollo last recorded a worse quarterly result at the beginning of 2017. “We have to look further back into the past to find an even lower take-up result for the first nine months of a year,” said Dr Konrad Kanzler, Head of Research at the NAI apollo group. “That was in 2012, when we calculated an autumn result of 313,000 sqm.” 

Market set to stabilise after record years

A direct comparison with previous years makes for sober reading. Compared to 2018, take-up has declined by 26.1 %, while the figure is as much as 30.7 % below the record result for 2017. “Although the economic slowdown is now having an impact particularly on the industrial sector, we still do not anticipate a general market downturn. It’s more the case that we expect to see the market stabilise after several years of record-breaking results. For example, other logistics markets in Germany, especially Berlin, continue to register take-up results at record levels,” said Michael Weyrauch, Head of Industrial Letting and Transaction at NAI apollo. Users are also still seeking large premises in the Rhine-Main area, and the successful conclusion of such deals would have a significant effect on take-up. Another problem then arises that has recently curtailed market activity. In the past few months, there has been a general shortage both of existing halls that meet user requirements regarding size and fit-out and of sites that are suitable for logistics developments in terms of location and eligibility for planning permission.

Take-up decreases in all asset classes apart from segment for smallest spaces

The category including “10,000-sqm-plus” spaces continued to generate the highest level of take-up in the third quarter of 2019. Ten deals have been completed in this category in the year to date, with total warehouse and logistics space take-up of around 188,000 sqm. This equates to a 46.5 % market share. “The largest deal took place in the second quarter and involved the purchase of part of the Opel site in Rüsselsheim by Ikea, which among other things will probably use an existing 33,000 sqm hall for a new goods distribution centre in future. In second place was the leasing of more than around 30,000 sqm by a logistics company in a project development in Rodenbach. This contract was signed in the third quarter,” said Kanzler. In spite of these deals, take-up of large spaces fell by more than 26 % or around 105,000 sqm compared to last year. However, a negative development was also evident in other categories, where declines of between 6 % and 37 % were recorded. Only the segment including warehouses and logistics buildings with less than 1,500 sqm of space continued to register growth, increasing by around 20,000 sqm year on year to more than 61,000 sqm. 

Warehouse and logistics companies move slightly ahead to retake first position

Transport, storage and logistics companies regained their status as the most important users of space in the third quarter of 2019. After losing its longstanding leading position in the first half of the year, this group once again accounted for the largest share of take-up at around 31.4 %. The two biggest deals of the recent quarter — the previously mentioned deal in Rodenbach and the signing of a lease contract for around 18,000 sqm in a project development in Wörrstadt by a logistics service provider — made a decisive contribution to this result. “Nevertheless, lettings activity in the storage and logistics industry remains far behind that of previous years, illustrated by the fact that space take-up fell by 60.8 % year on year to around 127,000 sqm,” said Kanzler. All other industries broadly maintained or increased take-up levels. As a consequence, retail and the industrial/commercial sector were only marginally behind with shares of 29.2 % and 27.7 % respectively. The two largest deals in the quarter also further boosted the importance of off-plan contract signings compared to the summer. Such deals accounted for a 21 % market share, which in absolute terms represents space take-up of 85,000 sqm. However, this falls substantially short of last year’s figures (204,000 sqm and 37.3 % share).

Improvement of supply situation is in sight

For the final quarter of the year, NAI apollo expects market activity to remain steady or increase slightly, while take-up is expected to be below the 10-year average of 586,000 sqm. The storage and logistics industry, which is a very important sector for this market, has also picked up slightly again recently. “In order to be able to meet future demand, the focus must continue to be on the space required, especially in the large-space segment, meeting the needs of potential users in terms of location and building features,” said Weyrauch. There are increasing signs that the situation is improving here. For example, the supply of available space in existing buildings has increased since end-June. With regard to new space, as of the end of the third quarter NAI apollo estimates that around 400,000 sqm of rentable hall space will be created in the 10,000-sqm-plus segment through projects that are either in the planning stage or have already been started, provided that all projects are realised. “This would amount to around 100,000 sqm more hall space than we had calculated in the summer,” said Weyrauch. There is also a continuing trend to carry out developments on sites that are conveniently located in outlying areas of the market.