LOGISTICS REAL ESTATE MARKET

Selected logistics and industrial projects

Rossmann

© phase 5 international GmbH

In August 2022, ROSSMANN started construction of a new logistics center in Burgwedel. The approx. 41,000 m² building for the Burgwedel regional warehouse and for ROSSMANN-online will be built in the immediate vicinity of the company headquarters by March 2024 (planning status) at a cost of 100 million euros. The building will be constructed in accordance with the DGNB certification system and will include a photovoltaic system on the roof. 550 employees will work here in the future.

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Verdion Expopark

Olaf Mahlstedt

Following the planned completion of the second construction phase in September 2021, Verdion ExpoPark Hannover will offer a further 47,000 m² of logistics, communal and office space. The investment amounts to around 60 million euros and the aim is to achieve DGNB Gold certification.

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VGP Park

Olaf Mahlstedt

The VGP Park Laatzen has a total hall area of around 112,000 square meters on around 24 hectares. In addition to the e-commerce company Connox (50,000 sqm) and the EDEKA Group (7,000 sqm), the third tenant is the machine and plant manufacturer KraussMaffei, which will use around 37,000 sqm of hall space as well as an administration building (18,000 sqm). Completion will take place from the end of 2021 until the second half of 2022.

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The logistics real estate market continues to soar. The Hannover Region plays a central role among German logistics regions as a national and European logistics hub and is an important port hinterland location for the seaports in northern Germany. Demand for industrial and logistics properties is particularly strong from commercial and industrial companies.

Downstream, many contract logistics companies, courier, express and parcel service providers have settled in the region or expanded their service portfolio. A characteristic feature of the market is that the regional logistics industry has a high level of added value of its own and has long since ceased to stand for pure warehousing and transportation tasks.

MARKET SENTIMENT AND TRENDS

For some years now, market players have observed that demand for logisticsand production space inthe region has been rising sharply. Since 2018, annual demand has stabilized at around 400,000 sqm. The stable and high demand meets a market-driven supply of new existing properties and project developments. In the last five years (2018 to 2022), around 825,000 sqm of warehouse space for logistics and production was completed in the Hannover Region. The projects planned or already known for the years 2023 to 2025 add up to around 330,000 sqm of warehouse space.

Despite increasing challenges: Take-up of hall space at all-time high - prime rents on the rise

The sector has experienced several highly dynamic years, with take-up of warehousespace peaking at 420,000 sqm at the end of 2022 - an increase of around 6% or 25,000 sqm. Primerents rose slightly to EUR 5.50 per sqm by the end of 2022 (up 20 cents). Overall, take-up and rents have settled above the pre-crisis level.

The challenges for the logisticssector and industry have increased further over the past three years: While it was initially the temporary border closures during the first wave of the pandemic, the disruptions to global supply chains, including at the Suez Canal, in China and in recent months due to the war in Ukraine, have added to this. Demand pressure is continuing because regional industry is increasingly being strengthened by bringing production back to or setting up production in Europe, including in the regionally important automotive industry.

Supply chains to become more crisis-proof - rising demand for hall space

Supply chains, not only in retail but also in industry, are therefore becoming increasingly secure and crisis-proof. As a result, the increased demand for warehouse space, the rise in e-commerce and the high capacity utilization of logistics infrastructures in the courier, express and parcel services sector continue unabated.

Logistics and Unternehmensimmobilien meet with stable and high demand

Market participants are therefore actually optimistic about 2022. The vacancyrate is lower than it has been for years. Letting opportunities are rated as good to very good without exception. However, it remains to be seen to what extent logistics and industrial customers will actually suffer from the worsening inflation and energy crisis, leading to a decline in demand on the real estate market.

The Hannover Region is a strong and resilient location for logistics

From the perspective of market players, the Hannover Region is already positioned as a strong and resilient location for logistics and industry. In recent years, politicians and administrators have responded with a more sustainable land policy: In addition to more economical and targetednew land designations, they have focusedmore stronglyon the revitalizationof brownfield sites.

Municipalities are practising a systematic commercial space policy that secures commercial space in a targetedmanner and facilitates integrated solutions instead of prioritizing the designation of new commercial space on greenfield sites. In the coming years, the demands for sustainability will continue to increase; municipalities and companies will focus even more on revitalizing existing buildings and pre-used commercial sites.