Berlin logistics property market 'going through the roof'

The rental market for warehouse, industrial and logistics properties in Berlin has delivered its best quarterly result since records began, according to sector-specialist Realogis.

In the months from July to September 2020, accumulated take-up of newly let space came to 182,000 sq m. This topped take-up in the same period of the previous year, totalling around 127,800 sq m, by 42 per cent. Almost half of all deals in the past quarter were for new builds (87,150 sq m), meaning that this segment grew by 88 per cent year-on-year (Q3 2019: 46,260 sq m). The sector that rented the most space was retail, at 38.5 per cent or around 70,000 sq m, with e-commerce accounting for 81 per cent or 56,400 sq m of this.

“Neither Covid nor the summer holidays nor the summer lull can slow down the Berlin logistics property market. As we predicted, some of the contracts announced in the second quarter have now been concluded. This compensates for the previous quarter’s dip at around 56,300 sq m,” comments Ben Dörks, Managing Director of Realogis Immobilien Berlin GmbH.

“The fourth quarter may also bring something of a rally, meaning that the 450,000 sq m threshold can be comfortably exceeded, with the Tesla Gigafactory in Grünheide potentially adding another 600,000 sq m according to Tesla. Breaking past the one-million threshold would represent an unprecedented overall result that would be equivalent to a good annual result for the top logistics markets in North Rhine-Westphalia,” says Ben Dörks.

“Sentiment on the market, whether in retail, wholesale, smaller production companies or logistics companies, is good despite the change in insolvency law as at 31 December. Everybody – with the exception of the events sector – is still looking for space. Although a lot of space has been let, not many high-quality properties are still available in city centres,” says Ben Dörks.

Take-up on the Berlin logistics property market comes to around 345,400 sq m for the past nine months (Q1–Q3 2020), putting it 12 per cent below the previous year’s result (Q1-Q3 2019: 393,800 sq m) but 0.9 per cent above the five-year average (342,360 sq m).

In the past nine months, existing properties contributed 51.8 per cent to the result (178,800 sq m), down 19 per cent on the previous year’s level (Q1–Q3 2019: 220,130 sq m). New builds accounted for 166,600 sq m or 48.2 per cent and were thus down 4 per cent (Q1-Q3 2019: 173,650 sq m).

“The city of Berlin is still recording consistently high demand, but this can hardly be met any more,” reports Ben Dörks. In the first three quarters, take-up in the city of Berlin thus came to 146,000 sq m (42.3 per cent of the overall result). This corresponds to a decline of 21.5 per cent as against the previous year (Q1–Q3 2019: 186,100 sq m; 47.3 per cent).

Many companies are therefore going to the immediate surrounding area. To the south of Berlin, for example, 145,200 sq m of space has been let in the past nine months (42 per cent of the overall result in Q1-Q3 2020), corresponding to a 16.5 per cent increase on the previous year’s result. The surrounding area to the north contributed 6.3 per cent or 21,700 sq m of take-up, which was 50.5 per cent less than in Q1–Q3 2019 (43,800 sq m; 11.1 per cent). The surrounding area to the west accounted for 5.2 per cent or 17,900 sq m, while that to the east represented 4.2 per cent or 14,600 sq m.

Compared to the same quarter of the previous year, successful letting activity increased by 155 per cent in the southern surrounding area, by 96 per cent in the east and by 1,807 per cent in the west. By contrast, the surrounding area to the north (-84 per cent) and the city of Berlin (-27 per cent) recorded a considerably lower volume of deals.

A total of 42.4 per cent of the space let in the past nine months was taken up by the retail sector (146,300 sq m), representing an increase of 6.6 per cent (Q1–Q3 2019: 137,250 sq m; 34.9 per cent). Within this category, 57.3 per cent was attributable to e-commerce (83,760 sq m).

“The production industry was in very good shape in the third quarter,” says Dörks. 

Whereas in the first three quarters of 2019 production companies were responsible only for a letting volume of 48,250 sq m (12.3 per cent), their share has now increased to 24.8 per cent or 85,600 sq m (Q1–Q3 2020). 

“Although in quantitative terms the result is dominated by major deals by automotive companies, it is important to mention that – as is typical for Berlin – many smaller production companies influenced developments with space of between 1,000 and 2,000 sq m,” says Dörks. "The logistics sector contributed 22.6 per cent or 77,900 sq m of total take-up, although this was 31 per cent less than in the previous year (Q1–Q3 2019: 112,850 sq m; 28.7 per cent)."

At 34.8 per cent or 120,200 sq m, the size category of more than 10,000 sq m accounted for the lion’s share (5 deals) and recorded a year-on-year increase of 6.9 per cent (Q1–Q3 2019: 112,400 sq m; 28.5 per cent). The size category of 3,000-5,000 sq m came in second with 20.6 per cent or 71,300 sq m (16 deals), corresponding to an increase of 23.1 per cent as against the previous year (57,900 sq m; 14.7 per cent). Properties measuring between 5,000 sq m and 10,000 sq m (8 deals) were responsible for 60,400 sq m (17.5 per cent), while the 1,000-3,000 sq m segment (32 deals) accounted for 54,500 sq m or 15.8 per cent and the less than 1,000 sq m segment (53 deals) for 39,000 sq m or 11.3 per cent.

Rental prices in the past quarter remained at the level of H1 2020, with the prime rent at EUR 7.00/sq m and the average rent at EUR 5.80/sq m.

“Companies that concluded leases now could still benefit from cheaper rents,” says Dörks is forecasting rent increases of between 5 per cent and 10 per cent for both new builds and existing properties, for 2021.