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Top location Frankfurt Airport: CargoCity set to remain popular logistics centre

Joint study by Fraport AG and NAI apollo provides an overview of the CargoCity North and CargoCity South logistics centres at Frankfurt Airport

Frankfurt, 28.06.2018 – A joint study by Fraport AG and real estate consultancy NAI apollo – partner of the NAI apollo group – found that CargoCity at Frankfurt Airport is an extremely strong logistics location. With a prime rent of more than €20 per sqm, rental prices for logistics spaces in CargoCity tend to be considerably higher than in logistics markets outside the airport. It comes as little surprise that the most important occupants within CargoCity are freight handling companies as well as cargo airlines. The biggest advantages of the location, and the reasons for the high rents, include access to the airport’s main customs office, direct links to the airport and the position of the logistics centre within the Rhine-Main region.

Logistics properties on airport sites can be compared to markets outside the airport area only to a limited extent. These properties distinguish themselves by their particular qualities in terms of asset and location, as well as a tenant structure geared towards air freight as well as rental and purchase prices that are largely decoupled from general market mechanisms.

The size of the airport logistics market alone sets it apart from the logistics market in the Rhine-Main area, with around 700,000 sqm of relevant logistics and office space — two-thirds of which is in CargoCity South and one-third in CargoCity North. Around 75% of the space included in the study is categorised as logistics space, while just over 24% is counted as office space. ‘Other space’ accounts for a share of less than 1%. With regard to the distribution of office space, 78% is situated in logistics properties and 22% in office buildings.

For the purposes of the study, which was undertaken by Fraport AG together with NAI apollo, Fraport data was analysed and information collected from a survey of leaseholders. The study provides an overview of the two logistics centres, CargoCity North and CargoCity South, an evaluation of stock as well as a tenant review, user information and the special features of airport sites.

CargoCity sets itself apart from the Rhine-Main logistics area
CargoCity particularly stands out when compared with the neighbouring industrial estates called “An der Gehespitz“ in Neu-Isenburg and “Mönchhof“ in Kelsterbach/Raunheim. While freight handlers and airlines represent the primary occupants within the airport boundaries, classic logistics service providers and trade companies generally dominate the Rhine-Main area. Furthermore, rental prices are much higher in CargoCity. For example, prime rents for logistics spaces in CargoCity North can exceed €20 per sqm — more than double the maximum rates in the comparable regions. CargoCity South tends to command lower prime rents of around €11.50 per sqm, but even this level remains unachievable outside the airport site.

High rental levels and full utilisation of logistics spaces due to unique location factors
The almost full occupancy of logistics spaces in CargoCity indicates that the high rental prices have no bearing on demand. The vacancy rate in the logistics segment stands at just 0.2%. The decisive factor here is that the airport location offers unique advantages to users. Given the resident companies’ focus on airfreight handling and international logistics services, it is hardly surprising that direct access to the apron plays an important role. Customs clearance, which is possible at any time within the airport area, can also be identified as a major advantage of CargoCity. Further positive aspects are the central location within the region and Germany, and good transport links.

High percentage of office space in existing logistics properties
While office buildings are expected to reach full occupancy by the end of the year, a surplus of office space is currently available in the logistics properties. Based on the corresponding office stock, the vacancy rate in CargoCity stands at 11.4% (CargoCity North: 13.6% / CargoCity South: 10.3%). At the same time, office vacancies in logistics properties are negligible in the “Mönchhof” (2.2%) and “An der Gehespitz” (fully let) areas.

The above-average share of office space in logistics properties within CargoCity has emerged as the main cause of this development. In the identified logistics buildings, the average office share of 20% and the maximum share per building of up to 50% not only exceed the levels in “Mönchhof” (13.9%) and “An der Gehespitz” (8.6%) but are also higher than normal maximum market levels of 8% in distribution centres and 20% in crossdock terminals. Property owners are aware of this problem. As a result, the percentage of office space has been reduced to usual market levels in current development projects, among other measures.

Positive market outlook for the future
The future prospects for CargoCity North and CargoCity South are positive. Points of criticism relate to the office space problem mentioned above, and especially to infrastructure planning such as car parks, restaurants and public transport. At the same time, demand for logistics space remains high, which will also be reflected in rental prices. Work is under way to increase the supply of space, particularly the upcoming project to expand CargoCity South by about 100,000 sqm of freight centre space plus adjacent office buildings and parking spaces.

To the study: www.nai-realestate.tmc-lab.de/de/marktberichte

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