By Dr. Dieter Rebitzer
May 2007

Logistics is a growth industry. The demand for modern space is respectively high. Investors have also discovered this industry, in part because it promises even higher returns than others.

The European logistics market is in an upheaval. European structures, which are part of a worldwide network that is, in turn, changing in the course of globalisation, are replacing national networks. The intensity of logistics is growing. By 2020, traffic volume will increase by 40 percent. Not all locations, however, can take part in this boom. Key countries profit from European integration more than the bordering regions. Germany, France and Great Britain, for example, make up half of the entire market.

Shift in focus

Photo: The airport Leipzig/ Halle is turning into a new logistics hub. The initial spark was made by DHL when they decided to build their European air freight centre here—a logistics hall with 48,000 square metres and a hangar of 23,000 square metres. The air freight centre should be up-andrunning this year.

After the expansion of the EU, the economic focus travelled south from Belgium to Germany. Add Russia, Belarus, the Ukraine, and Turkey to the mix, then the focus shifts to the region between Nuremberg and Leipzig. In other words, Germany will gain importance as the number one logistics centre in Europe. German logistics real estate can only profit from this.

Half of all logistics space in Germany is clustered in Hamburg, Frankfurt am Main, the Ruhr area, Berlin, Munich and Düsseldorf (in the order of existing space). All properties in these clusters are estimated to be nearly 14 million square metres. Since 1990—since the turnaround in Germany and the opening of the markets in Central and Eastern Europe—more logistics locations have experienced a boom, for example, Leipzig/Halle, Kassel/ Bad Hersfeld, Nuremberg and Stuttgart (Rhine-Neckar).

The clusters are developing differently from one another, either growing together or forming larger units with neighbouring clusters. Hamburg, for example, goes handin- hand with Bremen. There are roughly 25 primary clusters and another 60 secondary clusters in Europe. Since the European system is still developing, new clusters could easily appear, or the importance of the existing clusters could change over time. Typical examples of this are Dijon in France or Leipzig/Halle in Germany, but expansion in Central and Eastern Europe is also still in full force and new clusters are popping up.

Demand for large spaces

With this in mind, logistics companies are looking for properties with larger spaces for reorganising their existing national activities, and bundling the few European locations they have. Many of the existing logistics real estate are either too small or do not fulfil the current needs of the market players. There is particular demand for buildings with more than 5,000 square metres of usage space.

The number of development projects has increased respectively over the last few years, whereby developers are the most active in Central and Eastern Europe. Still, supply cannot satisfy the demand for logistics real estate, since the logistics industry is growing twice as fast as the economy – an average of four to eight percent yearly. Developing logistics space is “a sure thing”. Still, speculative

developments are fairly uncommon. Developers and investors avoid the risks of speculative projects. Considering the short planning and construction phases of four to eight months, the investors and developers wait until there is a user. In particular, specific needs of the user can be better fulfilled. However, industry experts assume that speculative investments will increase in the future.

Another trend that can be noted is: industry and trade are shifting their locations preferably to clusters with low rents and lower property prices, particularly when they need large areas. Therefore, one success factor is land availability. Things have improved here, but not everywhere to a sufficient degree. The property must fulfil the investment criteria of the investors, whereby the capacity for third-party use often plays a large role.

HOTEL MARKET
Overall dynamic development 

RETAIL
Faster, more focused, more expansive 

Retail Real Estate
Shopping Center Boom