NAI apollo: Warehouse and logistics space take-up declines in the Rhine-Main region during 2019

Frankfurt am Main, 28th January 2020

In 2019 the warehouse and logistics space market in the Rhine-Main region registered its lowest take-up result in recent years. Total take-up by tenants and owner-occupiers amounted to 478,000 sqm. In the period since 2011, annual results have exceeded at least 500,000 sqm and in three cases even 700,000 sqm. Last year’s result is also 20.6 % below the 10-year average (602,000 sqm). The decline was even greater compared to the previous year’s figure of 741,000 sqm — the third-best result of all time.

The fourth quarter contributed only around 74,000 sqm to the overall result. “This means that the final quarter of the year was by far the weakest, even though take-up in previous quarters was already below average, reaching 127,000 sqm in the third quarter and around 138,000 sqm and 139,000 sqm respectively in the first two quarters,” said Dr Konrad Kanzler, Head of Research at the NAI apollo group.

Various factors contributed to more subdued market activity

There are many reasons for this development. Anticipated large deals, which are still expected to be completed, failed to materialise in time but if included would have had a significant impact on the market figures. “It’s certainly the case that the market has slowed down after several years of record-breaking figures. At the same time, there is still a short supply of space that meets the needs of users. Meanwhile, owners of property in the medium-quality segment now have high price expectations, and this has caused some rental deals to fall through,” said Michael Weyrauch, Head of Industrial Letting and Transaction at NAI apollo. Added to this is the economic slowdown, particularly in the industrial sector. This development has particularly affected demand for warehouse and logistics space here since the start of the second half of last year.

Declines in large-space rentals and deals in project developments

In a direct comparison of the current figures with those from previous years, three key changes emerge, some of which are mutually dependent. “On the one hand, there is a noticeable decline in take-up in the large-scale segment, while on the other hand, deals in project developments have lost ground. In addition, transport, storage and logistics companies have been less active on the market,” said Kanzler.

With the exception of the sub-1,500-sqm segment, take-up has fallen in all size segments, but most significantly in the 10,000-sqm-plus segment. Here, take-up amounted to about 200,000 sqm in 11 deals. “Thus large spaces continue to account for the lion’s share of the volume at 41.8 %, but in absolute terms have fallen by 225,000 sqm compared to the previous year. At the same time, rental deals in project developments have decreased from 40.2 % in 2018 to 20.5 % last year,” said Weyrauch. In absolute terms, this equates to a decline from around 300,000 sqm (2018) to 98,000 sqm of marketed space (-67.1 %). For existing spaces, the corresponding drop is 27.7 %, while owner-occupier projects and purchases are increasing.

Significantly lower space take-up by transport, storage and logistics companies

Take-up by logistics companies fell by 316,000 sqm year on year (-70 %). This group ended 2019 with take-up of 136,000 sqm and a 28.5 % market share, losing its dominant position of previous years and now sandwiched between retailers (31.0 %) and industrial/commercial companies (26.4 %). Both of the latter industries made gains in absolute terms compared to the previous year.

“The largest deal of the year remains the purchase by Ikea in the second quarter of part of the Opel site in Rüsselsheim. The retailer’s plans for the site will probably include turning an existing hall of 33,000 sqm into a new goods distribution centre. In second place is the rental of around 30,000 sqm by a logistics company in a development in Rodenbach during the third quarter,” said Kanzler. This is followed at some distance by lease contracts signed by Coca Cola Deutschland in Bodenheim (Q2) as well as by Amazon in Gernsheim (Q1), with around 20,000 sqm of hall space apiece.

Some relief expected on the supply-side; demand remains high but future development unclear

As things stand, NAI apollo expects the market to remain stable or grow slightly in 2020. “There are indications that the situation will ease on the supply side owing to a number of planned building projects as well as projects that are already underway. Demand also remains at a high level,” said Weyrauch. However, a potential further slowdown of the economy would have a negative impact on space planning at companies in the medium term.