LIP Invest, a leading provider of logistics real estate special funds in Germany, has published the latest edition of its quarterly market report, “LIP UP TO DATE – Logistics Real Estate Germany.” This report addresses key aspects of the German logistics real estate market, including investment volume, take-up, new construction activity, as well as yield developments and geopolitical influences on the logistics sector.
The transaction volume in the German investment market for logistics real estate reached EUR 1.5 billion in the second quarter. The half-year result totals EUR 2.6 billion, which is approximately at the previous year's level. The second quarter was boosted by several larger deals, although small to medium-volume transactions continue to dominate.
Demand for space in the rental market has further increased to 1.9 million square metres. In the first half of the year, a total of 3.3 million square metres of logistics space was leased or newly constructed. This significantly exceeds the half-year level of the last three years. A persistently low level of new construction activity counteracts this trend; the new construction volume amounted to approximately 800,000 square metres in the second quarter.
Sebastian Betz, Managing Partner of LIP Invest, commented on current market drivers and challenges. He noted that defence-related uses are emerging as a new space driver, similar to established drivers such as e-commerce or automotive. However, Betz emphasised that this does not solve the industry's central challenges. Electricity availability, approval procedures, and financing are currently identified as key stumbling blocks. Regarding defence properties, he pointed out that extensive reporting could lead to an exaggerated market impression, as actual demand is not yet being realised to the presumed extent. For investors, third-party usability, location quality, and future viability remain crucial acquisition criteria, which are not necessarily met by purely defence-related properties. He spoke against structuring new funds exclusively for defence properties for diversification reasons.
Yields for logistics real estate increased as expected in the second quarter. The prime yield (BAR) for new builds now ranges from 5.00% to 5.40%. This range reflects an increasingly differentiated transaction activity. Smaller new builds in prime locations with long-term leases currently achieve the lowest yields of approximately 5.00%. The rise in yields is expected to continue in the coming quarters, especially considering potential impacts of the Iran conflict on capital markets and the financing environment.
