The market transaction volume for logistics and industrial properties was EUR 795 million in Q1 2023, according to research by international real estate consultancy Cushman & Wakefield (C&W). This means that the first three months of 2023 were the weakest start to the year since 2013.
Big tickets remain the exception
With a decline in transaction volume of 79 percent compared to the equivalent period last year, the investment market for logistics and industrial properties was affected somewhat more severely by the general market weakness than the commercial investment market as a whole (minus 72 percent). However, at around 16 per-cent, its contribution to total CRE transaction volume corresponds to the Q1 5-year average and thus confirms its stable high importance for investors.
transactionsin the first quarter were predominantly concluded in the price segment of less than EUR 30 million. There were only two transactions in the three-digit-million-euro range, the largest of which was the sale of the "Areal Böhler" in Meerbusch to Jamestown by Voestalpine. The lack of large portfolio transactions in particular weighed on the result and is also the reason why the contribution of international investors, who traditionally prefer portfolio purchases, was only 41 percent (Q1 2022: 65 percent).
Düsseldorf and Stuttgart strongest top-7 markets in terms transaction volume
With a share of 64 percent, the top-7 markets accounted for significantly more than half of the transaction vol-ume for logistics and industrial properties in Q1. The distribution is thus the reverse of previous years, in which the transaction volume was primarily generated by transactions outside the top-7. The reason for this special situation is that the three largest transactions in the first quarter were concluded in the logistics markets of Düsseldorf, Stuttgart and Hamburg. Düsseldorf made the largest contribution to the total, at around 21 per-cent, followed by Stuttgart with 18 percent and Hamburg with around 12 percent.
Value-add properties in demand
Light industrial properties were particularly in demand. Their market contribution in the first quarter of 2023 was around 70 percent. Core properties generated around 30 percent of the transaction volume, value-add proper-ties significantly more at around 40 percent. This is largely motivated by the expectation of further increases in rents for logistics and industrial space.
Prime yields rising
At the end of Q1, prime yields for logistics properties in the top-7 markets were quoted at 4.15 percent, 15 basis points higher than three months earlier. Compared to a year earlier, the increase is 114 basis points.
The average prime yield for the best light industrial properties in the top-7 markets rose by only 50 basis points compared to a year earlier, to 5.01 percent. The gap to the prime yields for logistics properties has thus nar-rowed from 150 basis points to 86 basis points in the last twelve months.
Against the background of further announced interest rate steps by the ECB and the still volatile and challeng-ing financing environment, C&W expects a further upward adjustment of prime yields in the coming months.