Ten new construction projects for logistics and industry in northern Germany
Northern Germany is upgrading and providing modern space for the logistics sector, now considered systemically relevant, with a total of nine speculative new construction projects in the regions of Bremen and Hanover and a built-to-suit property in Osnabrück/Bielefeld.
A total of around 1,644,000 sq m of industrial and logistics space was newly let in Germany outside of its top eight logistics locations in the first six months of 2020. This represents 56.7 per cent of the entire German letting market in this category, which Realogis – the leading consulting firm for letting and investments in industrial, logistics and commercial properties in Germany with 70 experts – estimates at 2,900,000 sq m of take-up in the first six months.
For years, this has been driven by the logistics regions of Bremen, Hanover and Osnabrück/Bielefeld. “After years of complaints about a lack of industry and logistics properties, nine project developments with a total of 273,000 sq m of new space in the regions of Bremen and Hanover are currently being planned or carried out,” says Christian Beran, Managing Director of Realogis Immobilien Deutschland, whose responsibilities include these three sub-markets.
“Take-up remained stable in the first half of 2020 despite Covid-19 but the market was still characterised by low vacancy rates. It is often not possible to meet last-minute requests by companies. This inspired several project developers to provide new space to the maritime and logistics industries, which employ around 40,000 people in the region,” says Beran.
“Five current speculative – ie no tenants have been secured in advance – new construction projects, each with at least 15,000 sq m of logistics space, show that project developers are stepping up investment in the Bremen logistics region. A pipeline of 131,000 sq m of new space is a first on the Bremen market,” added Christian Beran. The units are expected to be ready for occupancy in the first quarter of 2021.
According to Realogis, average rent for existing properties has risen from EUR3.80-4.00/sq m in Q1 2020 to EUR3.80-4.40/sq m, with prime rent picking up from EUR4.50/sq m to EUR5.00/sq m.
“While the Bremen region already has a high share of people working in logistics, this will continue to climb in the future as a result of additional logistics sites and an unemployment rate of 12 per cent in Bremen alone in August,” says Beran.
Given its seaport connection, the region of Bremen – which includes the cities of Bremen, Bremerhaven, the nearby city of Wilhelmshaven in Lower Saxony and the surrounding areas between these – has a long tradition of maritime logistics thanks to its “global gateway” status. This was again bolstered by the JadeWeserPort harbour project, which began operations in 2012. Thanks to the variety of cargo-handling facilities and excellent transport links to the four A1, A27, A28 and A7 motorways, the region is very attractive to the automotive, food and logistics sectors, which use the area to process their international flows of goods destined for production and trade. In future, Deutsche Bahn’s plans to expand routes in order to shift cargo transport from road to rail will provide an additional boost to the locations.
“The market is gradually picking up again. Unlike at the start of the year, we are seeing increasing demand for high-volume units. At the same time, existing space will be coming onto the market in the Hanover region in the near future, which is a good sign for companies that want to set up business very quickly at established locations,” says Christian Beran. Current new construction projects are spread all over the place and total 142,000 sq m of new building space.
“Given the previous shortage of existing space, especially for the automotive industry and for textiles and furniture trade, users had to look for suitable properties across a larger area. To retain these innovative companies, investors and developers are now creating space in the metropolitan region,” said Christian Beran.
At EUR5.35/sq m, Realogis recorded the highest prime rents charged by lessors in northern Germany in 2020 in the Hanover logistics region, a 9.18 per cent increase against Q1 2020 (EUR4.90/sq m). Average rent rose from EUR4.00/sq m to EUR4.00-4.50/sq m.
While over 600,000 people work in haulage and logistics across Germany, the sector employs over 82,000 in the Hanover region alone, 69,000 of whom work directly at logistics companies and another 13,000 in sectors related to logistics. With unemployment currently at 8.3 per cent (Hanover region, August 2020*), there is still room for the number of people employed in logistics to increase.
The Hanover region is a key consolidation and distribution centre for transport to outlying areas. As a logistics region covering the greater area of Hanover, Salzgitter, Braunschweig and Wolfsburg, it benefits from the fact that it connects three key modes of transport: road (north-south hub with the A7 and east-west with the A2), rail (central east-west and north-south interchange) and water, making it one of Germany’s most attractive logistics regions. It is also very important at present thanks to the Megahub Lehrte, which allows cargo to be transferred between rail and road and also provides loading units between different trains.
The construction of a new container terminal at the Osnabrück port is due to be completed by summer 2021, further expanding the handling of up to 150,000 loading units from road to rail. “This will further drive the importance of Osnabrück as a logistics hub and also boost the market for warehouse and logistics space for outgoing transportation,” Christian Beran said with confidence. Garbe Industrial Real Estate is currently constructing a built-to-suit pharmaceuticals property, which will be used by shipping company Koch International from next year.
“Demand for space between 5,000 and 15,000 sq m and that is available at short notice has been stable for years. Given the lack of available project development sites, such as in Bremen and Hanover, users will have to wait longer for speculative projects in the Osnabrück/Bielefeld region”, added Christian Beran.
While Osnabrück’s unemployment rate of 4 per cent in August 2020* means it has only limited scope for more people to join the logistics sector, the figure for Bielefeld is 9 per cent and so the potential here is relatively high.
Average rent rose from EUR3.50/sq m to EUR3.50- 3.80/sq m against the previous year, with prime rent seeing a moderate increase from EUR4.00/sq m to EUR4.20/sq m. Average rents in Bielefeld picked up from EUR3.50/sq m in 2019 as a whole to EUR3.50-3.80/sq m and prime rent increased from EUR3.90/sq m to EUR4.20/sq m. The range for existing properties saw an upturn from EUR3.30-3.90/sq m in Q1 2020 to EUR3.40-3.95/sq m.
The Osnabrück/Bielefeld region, connected by three modes of transport, is characterised by its high number of robust SMEs with a strong focus on production, chiefly in machinery, automotive and food, and is home to the headquarters of many hidden champions. As an attractive sales market for production-related contract logistics services and a handling location between the North Sea and the Ruhr region, the area benefits from its good transport links. The A1 runs north to south and connects the region with northern German seaports and the Ruhr region, while the A30 goes east-west and links it to the Netherlands and Hanover. Germany’s inland waterways can be accessed via the Dortmund-Ems canal, which is used chiefly to transport bulk goods. Large cargo barges should be able to pass through here by the end of the decade.