Logistics vacancy rate at record low: rents rise, new construction volume falls

A remarkable trend has emerged in the world of industrial and logistics real estate: Vacancy rates reached an all-time low, bringing with it both opportunities and challenges. This trend goes hand in hand with changes in rental prices and in the new construction sector.

Historically low vacancy rate for logistics properties

According to studies by Garbe Research, take-up of logistics space slowed significantly in the first half of 2023. On the one hand, this can be explained by the economic situation, but is mainly due to the fact that there is hardly any marketable space available – logistics properties currently have a historically low vacancy rate. According to Expert:innen, the logistics real estate market is currently almost fully let.

Fewer new builds due to high interest rate

One reason for the unusually high occupancy rate is the low volume of new construction. Building has become significantly more expensive – this is impressively demonstrated by the rise in construction prices and interest rates. As a result, the pace of new construction is currently declining. Around 1.6 million square meters of new logistics space were built in the first half of 2023; around 900,000 square meters of this was in the second quarter. Although construction activity has increased again over the course of the year, it is predicted to be significantly lower than in previous years.

Significant increase in prime rents

And so the familiar interplay of supply and demand comes into play: if fewer properties are available while demand remains high, the space on offer becomes correspondingly more expensive. According to Garbe Research, prime rents for logistics properties therefore rose significantly again in the first quarter of 2023, whereas the growth momentum slowed again in the second quarter.

In Germany, the strongest rent increases were recorded in submarkets in the west: prices per square meter rose by EUR 1.10 in Cologne, by EUR 1 in Dortmund and by EUR 0.80 in Düsseldorf, as well as in Munich. According to the Garbe Research Pyramid Map, the average rent increase in Europe was EUR 0.44 per square meter – the submarkets just mentioned are therefore significantly higher. The highest prime rents in Germany can be found in the top 7 cities (including Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart), with rents varying between EUR 8 per square meter (Düsseldorf) and EUR 9.80 (Munich).

Forecast excess demand until 2024 – cooperation is in demand

The lack of available space, combined with the enormous increase in construction and interest rates, means that less is being built and the available buildings are being utilized more than ever before. This is also resulting in rental growth in regions that are not among the top 7, but still have space potential – for example in the Ruhr area, the Ostfalen-Lippe/Osnabrück region and Kassel. As a result, the acceptance of locations outside the conurbations continues to increase among investors.

According to the experts’ predictions, the excess demand will continue into 2024, as there is currently not enough construction despite the low vacancy rates. The rise in prime rents is therefore also expected to continue – even if it is likely to be more moderate in the coming year.

This makes it all the more important to rethink partnerships and collaborations in the areas of finance and investment. After all, dialog between investors, developers and logistics companies can open up new avenues for construction projects and the use of existing space. BUILDINX has set itself the task of creating a platform for all topics in the field of logistics and industrial real estate and bringing together all the players involved.

Author: Franziska Steffes