CITY INVESTOR GUIDE SERIES: BERLIN75D7A04C-357B-4FD3-BBC2... · logistics sector forms an important basis for economic prosperity in Germany as well as in Austria and Switzerland.

1

CITY INVESTORGUIDE SERIES:BERLIN

1

LOGISTICSPROPERTY

Market Report

Germany | Austria | Switzerland

22

INTRODUCTION

A LOGISTICS PARADISE

The logistics industry provides a lifeline for today’s modern economies as it facilitates the supply of products to the population at large as well as the exchange of goods with other countries. Accordingly, the logistics sector forms an important basis for economic prosperity in Germany as well as in Austria and Switzerland. The robust economy gives significant impetus to the logistics industry in the German-speaking (DACH) region. In turn, this leads to rising demand for logistics property and the land that is required to develop it. Logistics real estate refers to buildings that are primarily equipped for handling and storing goods as well as for carrying out related services.

33

Logistics properties tend to be one-storey structures that are categorised as warehouses, transshipment halls, and distribution halls, and as specialist logistics properties such as high-bay warehouses, chilled goods warehouses and hazardous goods stores. Around 45%-60% of logistics sites are overbuilt and generally offer large courtyards and extensive space for shunting as well as sufficient parking for cars, trucks and trailers. Modern logistics facilities also include office and leisure areas that typically account for an average 5% to 10% of the total space. At the same time, the proportion of office space is shrinking as a result of digital transformation and the related automation of operations.

The booming logistics property market segment is fuelled not only by the generally positive economic situation but also by further social developments. Demographic change, the migration towards cities and the boom in online retail are bringing about a growing need for logistics services. At the same time, the spaces required to support these services are becoming less available owing to conversions and legal restrictions. As a result, demand for logistics property is huge, although the supply of the required space is scarce. The inevitable outcome of rising demand combined with a limited supply is that prices increase, and this trend has now been evident for some years.

44

SWITZERLAND | As was also the case in Germany, the transaction volume increased significantly compared to the previous year, rising by 34%. Regional players exert an even greater influence on the Swiss market structure than in Austria, and foreign interest in Swiss property is low. Only 17 cents of every euro invested in Switzerland originates from abroad. Since owner-occupiers are also extremely dominant here, a “market” in the traditional sense of the term does not really apply in Switzerland.

AUSTRIA | In 2017 Austria registered a 22% year-on-year decline in the market volume to €390 million. This was primarily owing to the fact that Austria, like Switzerland, is a small market and large individual deals therefore tend to influence the entire market structure. Regional investors play an important role in Austria; foreign investments only account for a 27% share.

GERMANY | The German market for logistics real estate tends to feature a particularly high proportion of foreign investors and strong growth in transaction volumes. In 2017, investments increased by 81% and foreign investors account for 73 cents of every euro invested in Germany. In Hamburg, the rate was almost 90%. Domestic and foreign interest remains high, but the investment volume will be lower year-on-year in 2018 because of the shortage of properties.

55

10%

20%

30%

Population Growth[ 1972 - 2017 ]

Germany Austria Switzerland

More and more people living in Germany, Austria and Switzerland need to be supplied with the goods they want.

POPULATION FIGURES: SWITZERLAND IS THE FASTEST GROWING MARKETIncreasing numbers of people live in Germany, Austria and Switzerland. In Germany, the population rose from 78.8 million in 1972 to 82.7 million in 2017, corresponding to a 4.9% increase overall. In percentage terms, population growth has been higher in Austria and Switzerland: in Austria, the population increased by 16.6% from 7.5 million to 8.8 million in the same period, while in Switzerland the percentage increase was even higher at 35.5% (from 6.2 million to 8.5 million people). However, almost 10 times as many people still live in Germany compared to Switzerland and Austria. Aside from the obvious diff erences in size, the three markets are all enjoying robust growth. The gross domestic product per capita continues to rise, and is highest in Switzerland.

Austria SwitzerlandGermany

GDP per Citizen in Spending Capacity[ x1,000 Euro 2016 | 2017 | 2018 (Prognosis) ]

40

30

25

35

45

66

A logistics property transaction in Germany currently has an average volume of about €61.1 million, putting the German market well ahead in the DACH region. In Switzerland, the average volume is about €24.6 million while Austria lags behind with just €11.7 million. The higher sums paid in Germany also reflect the larger types of operations that can be acquired between Kiel and Lake Constance, as transactions often not only involve individual halls but also hubs or entire logistics centres.

In 2017, the total transaction volume in Germany stood at around €8.5 billion. Including German shares of international portfolios, Germany even achieved a record value of more than €10 billion. In comparison, Switzerland recorded a volume of €913 million and Austria only €390 million. Figures reported for the first half of 2018 signal much lower growth overall. One reason for this is the growing shortage of supply.

This situation creates opportunities for sites that are more difficult to develop because of sub-optimal planning or contamination and therefore require special expertise. None of the three markets will be able to repeat last year’s result. While this represents a trend reversal in Germany, it demonstrates a continuation of the decline in inward investments in Austria.

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

1Month: 2 3 4 5 6 7 8 9 10 11 12

Transaction Volumes 2017 in Euro | Germany

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

1Month: 2 3 4 5 6 7 8 9 10 11 12

Transaction Volumes 2017 in Euro | Austria

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

1Month: 2 3 4 5 6 7 8 9 10 11 12

Transaction Volumes 2017 in Euro | Switzerland 9.8billion

Logistics transaction volume in the DACH region in 2017

All data and grafics: © Arcadis Research 2018

77

Logistics transaction volume in the DACH region in 2017

777

Top TransactionsSwitzerland

Walzwerk Site Basel-Landschaft

Route de la Maison-Carrée 27 Genf

Parker Hannifin Site Genf

Lerzenstrasse 20

10M€: 20 30 40 50

Zürich

Basel-LandschaftFrikusweg 1

Top TransactionsAustria

10M€: 20 30 40 50

Zettling

Brennaustraße 1 Krems

C&A Warehouse Enns

SML Liegenschaft Lenzing

Magna Logistikzentrum Graz

Grafenbergerstraße 37 Eggenburg

Steinergasse 30 Wien

Isovoltaicstraße 1 Lebring-St Margarethen

ZettlingIndustrial Portfolio Deutschland

100M€: 200 300 400

Top TransactionsGermany

Zettling

Deutschland Distribution Portfolio Vogtei

Amazon Distribution Center Graben

Amazon Westfalenhütte Dortmund

German Logistics assets III

German Logistics assets IV

German Logistics assets I

Logistics PanEuro Portfolio JV multiple assets

multiple assets

multiple assets

multiple assets

88

-100%

0%

100%

200%

300%

400%

500%

600%

700%

1 4 6 7 8 9 12

Increase/Decrease of Transaction Volumes from 2016 to 2017

Switzerland

Austria

Germany

2 5 10 113

Switzerland achieves top values in transaction volumes per inhabitant

0

20

40

60

80

100

Austria

Transaction Volumes in € per capita[ 2016 / 2017 ]

SwitzerlandGermany

99

Higher purchase prices mean lower yields – and logistics property prices have been rising for years. It is frequently the case that prices achieved during sales processes far exceed the expectations of the sellers – a development that attests to the growing discrepancy between supply and demand. This trend is also now having a significant impact on net initial yields. In 2017, prime yields for modern industrial and logistics properties in very good locations in Germany fell below the 5% barrier and now stand at only 4.5%. In Switzerland, the rate was as low as 4.2%, while in Austria it was still at 5.5%. However, individual transactions are moving significantly above this trend on a consistent basis.

Upper outliers are still possible in the entire DACH region

0

4%

5%

6%

Top CapRates

Switzerland

4.2%

Germany

4.5%

Austria

5.5%

7.3%

6.4% 6.3%

5.0%4.3%

0%

2%

4%

6%

8%

10%

2014 2015 2016 2017 2018

Ground-weighted Top CapRates in the DACH Region

SwitzerlandGermany Austria

0

500

1,000

1,500

2,000

2,500

3,000

Prices in €/sqm

bottomlower 25%medianupper 25%top

Decrease of Top CapRates from 2014 to 2018:

€3,000

3%-

Top purchase price per sqm

1010

Migros

Swiss Finance & Property

AXA Group

Procimmo SA

Akara Funds AG

HIAG Immobilien

Solufonds SA

CPEG Geneve Pernsion Fund

Activ Group

Mettler2Invest AG

ECOREAL

Edmond Rothschild Group

Canton of Fribourg

Baloise Group

Novoreal AG

Hansjörg Wyss

Investis Group

Helvetica Swiss Commercial

Stiftung Abendrot

Swiss Prime Site

Top BuyersSwitzerland

M€

20016012080400

Top BuyersAustria

M€

7050301002,0001,5001,0005000

Top BuyersGermany

M€

CIC

Blackstone

Frazers Property

M7 Real Estate

AXA Group

GLP

Garbe

RLI Investors

Giant

Aurelis Real Estate

Union Investment

CBRE Global Investors

BEOS AG

TH Real Estate

Palmira Capital Partners

DekaBank

GIC

Invesco

Gulf Islamic Investments GII

Rasmala plc

Haselsteiner Family

Frasers Property

Quehenberger

CIC

Palmira Capital Partners

Merck & Co

OSW

BOP Immodevelopment

Soravia Group

Strabag

GRAWE

Swietelsky

XXXLutz

Vienna Insurance Group

Mayweg Immo

Neue Heimat Gewog

6B47-Gruppe

Immohold AG

Familienwohnbau

Alpha Industrial

101010

International investors are gaining ground

1111

Migros

Swiss Finance & Property

AXA Group

Procimmo SA

Akara Funds AG

HIAG Immobilien

Solufonds SA

CPEG Geneve Pernsion Fund

Activ Group

Mettler2Invest AG

ECOREAL

Edmond Rothschild Group

Canton of Fribourg

Baloise Group

Novoreal AG

Hansjörg Wyss

Investis Group

Helvetica Swiss Commercial

Stiftung Abendrot

Swiss Prime Site

Top BuyersSwitzerland

M€

20016012080400

Top BuyersAustria

M€

7050301002,0001,5001,0005000

Top BuyersGermany

M€

CIC

Blackstone

Frazers Property

M7 Real Estate

AXA Group

GLP

Garbe

RLI Investors

Giant

Aurelis Real Estate

Union Investment

CBRE Global Investors

BEOS AG

TH Real Estate

Palmira Capital Partners

DekaBank

GIC

Invesco

Gulf Islamic Investments GII

Rasmala plc

Haselsteiner Family

Frasers Property

Quehenberger

CIC

Palmira Capital Partners

Merck & Co

OSW

BOP Immodevelopment

Soravia Group

Strabag

GRAWE

Swietelsky

XXXLutz

Vienna Insurance Group

Mayweg Immo

Neue Heimat Gewog

6B47-Gruppe

Immohold AG

Familienwohnbau

Alpha Industrial

The Chinese are investing in Germany, and German investors are on a buying spree in Austria. German logistics properties were extremely popular in China during 2017, and Chinese investors accounted for a 25% share of the volume. US players were in second place with a 19% share, followed by the UK with 15%. In Austria, more than 40% of the foreign transaction volume originated from Germany, and the market was also in vogue in China (36%) and the USA (22%). In Switzerland, US investors have been particularly active here.

Germany is a major focus for international investors, which accounted for 73% of the investment market last year. Institutional and private investors, on the other hand, played a minor role in 2017: their shares fell to 11% and 12% respectively. In contrast, institutional and private investors play a more significant role in Switzerland with shares of 33% and 20% respectively, while international investors accounted for only 17%. In Austria, private investors are particularly important, accounting for 54% of the investment volume in 2017 compared to just 6% for institutional investors. Foreign players were responsible for 27% of investments in Austria.

The Chinese are buying in Germany, the Germans are buying in Austria

Groups of Buyers 2017

AustriaGermany Switzerland

Cross-border

Institutional

REIT/listed

Private

User/other

International investors are gaining ground

1212

Arcadis is the leading global Design & Consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, project and management services we work in partnership with our clients to deliver exceptional and sustainab-le outcomes throughout the lifecycle of their natural and built assets.

We are 27,000 people active in over 70 countries that generate €3.2 billion in revenues. We support UN-Habitat with knowledge and expertise to improve the quality of life in rapidly growing cities around the world.

Arcadis Germany

@arcadisgermany

www.arcadis.com

CONTACT

COMPANY PROFILE

www.arcadis.com

Arcadis

@ArcadisGlobal

Girish KripalaniWestern Operations Director, BuildingsT +1 714 508 2610E [email protected]

Macaria FloresCity Executive - Los AngelesT +1 213 797 5277E [email protected]

Mike JohnsonPrincipal, Business AdvisoryT +1 310 844 2833E [email protected]

Kelly M. FarrellSenior Vice President, CallisonRTKLT +1 213 633 1192E [email protected]

CONTACT:

*FIGURE 2:

Criteria definitions:

Competitiveness – overall assessment of performance including the economy, R&D, culture and the environment based on published indices.

Financial Power – an assessment of business environment and specific position of the financial services sector calculated using published indices and survey responses.

Global engagement – overall assessment of connectivity in business, culture and politics based on published indices.

Sustainability – balanced assessment of economic, social and environmental sustainability based on published indices.

Real estate momentum – combines short-term market indicators describing demand for real estate with long-term measures of the attractiveness of a market based on innovation, education and so on.

Tourism – measures the number of tourists and their spending habits.

*FIGURE 5:

Notes:

– Costs are current in Autumn 2016 based on exchange rates on 10th October 2016

– Office costs include the developer's finish but exclude the tenant's fit-out

– Hotel costs include FF&E

– All costs exclude allowances for external works, professional and statutory fees and local sales taxes

– Rates are calculated on the basis of gross internal floor area.

Falk SchollenbergerHead of Business Advisory, Arcadis Europe Centralphone +49 151 17143025mail [email protected]

Heike HenrichDirector Business Advisory, Arcadis Germany phone +49 152 24657089mail [email protected]