LIP Invest reports continued growth in Germany’s logistics real estate market

LIP Invest, a leading provider of special real estate funds for logistics properties in Germany, has published its latest quarterly market report, LIP UP TO DATE – Logistikimmobilien Deutschland, for the third quarter of 2024. The report highlights ongoing growth in the logistics real estate sector, with a notable increase in investment activity and emerging trends that could shape the market’s future.

The report provides an in-depth analysis of transaction volumes, space take-up, new construction activity, and yield trends. It also offers an outlook for the fourth quarter, including the potential impact of political developments in Germany and the United States on market dynamics.

Market Overview: Steady Growth Amid Challenges

Germany’s logistics real estate market continued its upward trajectory in the third quarter, with transaction volumes exceeding the subdued levels of the previous year. While the market has yet to reach the record-breaking heights of 2021 and 2022, investor interest remains strong.

“The increasing availability of logistics properties is driving market activity, and we anticipate further growth in investment volumes,” said Sebastian Betz, Partner and Managing Director at LIP Invest. “Investors are expanding their focus beyond traditional logistics hubs, while falling interest rates are making value-add properties more attractive.”

Gross initial yields for prime properties showed signs of decline, standing at 4.80% to 5.05% in the third quarter. However, further developments will depend on external factors, including inflation trends and interest rate decisions in the EU and the US. A more significant recovery is expected in early 2025, potentially bolstered by anticipated political shifts in both countries.

Investment Market: Portfolio Deals Dominate

In Q3 2024, logistics property transactions in Germany reached €1.4 billion, bringing the total for the first nine months to €4.3 billion—a 12% increase compared to the same period in 2023. Around half of the transaction volume was driven by portfolio deals, including P3’s acquisition of 12 logistics properties in southern Germany, totaling 269,000 square meters of rental space.

Despite the steady activity, properties from earlier quarters that remain unsold were excluded from the potential investment volume, which reached €700 million in Q3. New offerings include production warehouses, indicating a diverse range of investment opportunities.

Stable Take-Up of Space

Logistics property take-up remained steady in Q3 2024 at 1.35 million square meters. The majority of leases were for spaces between 5,000 and 30,000 square meters, reflecting cautious expansion in light of economic conditions. Larger rental agreements were rare, though notable deals included Duvenbeck Logistics leasing 11,500 square meters in Mühldorf am Inn.

In the first three quarters of 2024, total take-up reached 3.85 million square meters, while 850,000 square meters of new logistics properties were completed in Q3. This brought the year’s total new construction volume to 2.95 million square meters, with further projects expected in Q4.

Sustainability Trends: Timber Construction in Logistics Properties

The use of timber in logistics property construction is gaining traction as developers prioritize sustainability. Modern timber structures can support large spans and provide CO2 emission reductions compared to traditional reinforced concrete. Timber buildings also offer advantages in the circular economy, as they can be dismantled and reused, extending their lifecycle beyond that of conventional materials.

Outlook for Q4 and Beyond

The German logistics real estate market is poised for continued growth, with political developments in early 2025 potentially spurring further optimism. Falling interest rates and an increase in high-quality investment opportunities are expected to attract additional capital to the market.

LIP Invest’s quarterly report, available for free download on their website, underscores the resilience of the logistics real estate sector and its capacity to adapt to shifting economic and environmental priorities. With €4.3 billion in transactions already completed and innovative trends such as timber construction gaining momentum, the sector is set to remain a cornerstone of Germany’s real estate market.