a German perspective
"The demand for logistics investment will bring the investment volume to new record levels in the coming years. Already every 3rd investor1 has taken logistics real estate into account in his purchase criteria."
Frederic Feldmann
Head of Investment, Berlin
Avison Young Germany

Whilst national and global players continue to dominate in the city centers and shopping malls, more or less fighting for sales, we currently see two opposing trends in the district locations. In some streets (in the B to D cities as well as district locations in the big cities) the small-scale offers such as kiosk, fast food, hairdressers, nail studios and city supermarkets are repeatedly found. However at the same time, there is a return to special trades. Particularly in the gentrified suburbs, examples of high-end butchers, bakeries, wine stores and perfumeries are fighting back. Most of these providers have a consulting or fresh produce component while many of these trades (apart from most fresh produce components) also use analog digital distribution channels and tend to require more storage space.

Just in time vs just in case - from store to logistics hub

Nevertheless, it remains a challenge to maintain lively shopping locations. We assume that the advisory component relating to the topic of retail anchored assets will continue to increase. Currently the retail space available for all top 5 locations is around 14.6 million m²2. Due to the Covid-19 pandemic, which as a trend accelerator is expected to increase the share of retail sales in the online trade segment even in the long term, owners of retail space are confronted with urgent questions such as future rental income, potential for subsequent use or conversion of their assets. Close cooperation with the cities and municipalities appears to be indispensable in this structural change. Even if large halls in the best possible proximity to the city currently still dominate the demand, we will increasingly see small-scale logistics infrastructure in inner-city locations. Logistical uses or hybrid solutions can partially fill the gaps left by the retail trade. While click and collect concepts can make sense in prime locations, we see MicroHubs rising along the main transport axes. This process is just beginning and will accompany us for a while until the structural change is completed. This can also be seen in new district developments. Even though the focus is still on uses such as residential, parking and retail, distribution concepts are now being considered.

"The crisis will increase the pressure for innovative logistics solutions. The resulting increased demand for logistics space will inevitably result in an increase in supply-side rents."

Kay Hagen Kolberg

Senior Consultant Industrial Hamburg

Avison Young Germany

New players in the city logistics sector

The challenge with logistical uses in central locations is always to compensate for the additional logistical effort: from the physical storage facilities to traffic congestion - and the resulting resistance - or municipal regulations. Here, the increasing ESG investment behavior of companies and alternative delivery options can play a major role. The acquisition focus will have to be placed much more on logistically usable assets, either in whole or in part. It makes sense here to cooperate with product providers in the logistics segment in order to be able to participate in the high demand for these products. In addition to the big players who are looking for maximum space in the city centres, we are currently seeing many new innovative companies on the user side who are taking a smaller approach and trying out new delivery or storage possibilities. In some cases, the respective approaches are very granular, such as the leasing of remaining space. In general, however, a trend could emerge here.

Continue reading Germany 2021 Forecast

Footnotes

1 https://www.universal-investment.com/de/themen/presse/immobilien-investorenumfrage-2020 2 https://de.statista.com/statistik/daten/studie/946745/umfrage/bestand-an-einzelhandelsflaechen-an-den-groessten-standorten-in-deutschland/

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