E & G Industrial & Logistics Properties Stuttgart Region


Industrial & Logistics Property. Stuttgart Region 2018.

Contents. Foreword.......................................................................................................4 Facts & Figures.............................................................................................6 Investments................................................................................................12 GPP-Market Data Germany 2017/2018................................................14 Your Contact Partners...............................................................................16 Our Services................................................................................................17 E & G Real Estate........................................................................................18 German Property Partners.......................................................................19

Foreword. With a share of 52.5% and ca. 117,000 square metres of space turnover, automotive OEMs and their regional supply chain continue to be the drivers of this positive trend. Their need for integrated processes has been feeding the space demand by automotive contract logistics and production-related forwarders. Markus Knab Head of Industrial & Logistics Properties 4 I As a result, these market players have generated a market share of 20.5% in 2017, which corresponds to ca. 49,000 square metres of logistics space. These figures make a strong case for a region, which is still highly dependent on the automotive sector. Yet, they are quite in line with nationwide trends and developments in Germany. According to an economic survey by the German ifo-institute from January 2018, negative export expectations can be observed in nearly all industrial sectors. The exception to this rule remains the German car industry who are counting on a further upturn of their international business especially in Asia. The measures by the German government to promote e-mobility have also had a positive impact in the Stuttgart Region. From our operative business and the current tenders in the automotive sector we can project an increased demand for electric drives and respective research and development. Yet, this structural change is not going to happen disruptively, but rather step-by-step. As the transition to e-mobility will still require the combustion engine as bridging technology, both drive systems will run parallel minimum up to 2025. The current trend for outsourcing in the automotive sector as well as in other industries will be pushed to a high level. This means that the automotive suppliers and logistics servicers of the Stuttgart Region can count on a stable and sustainable environment for their business. Especially system logistics providers profit from the commissioning of complex works such as pre-assembly to external partners. While such assignments place high requirements on the respective logistics facilities, they are rewarded with longer contract durations of five to seven, and in some cases of up to ten years. At the same time, the space demand from the industrial sector has been significantly lower with a share of merely 11.5% and an overall take-up of 27,000 square metres of industrial hall space. This can only partly be explained by the aforementioned trend for outsourcing to logistics service providers. Furthermore, the industrial companies of the Stuttgart Region continue to strongly focus on their core business in order to meet the challenges of industry 4.0 (automation and digitalization). For the investment market in light industrial and especially for logistics property, the described trends seem to create a positive environment. However, the scarcity of the sought-after asset class logistics property has lead to a further compression of yields. Currently, the gross initial yield for such products still lies at 5%. Yet, it can be assumed that this figure will come under further pressure over the course of the year. The high space volume in the last year can be accounted for by the fact that many development projects were implemented on so-called brownfield sites (plots with previous industrial use). In some cases, the preparatory measures (remediation, species conservation, planning approval, etc.) had taken years in order to make these sites available for industrial re-development. On the basis of our on-going market research, we do not expect this trend for brownfield developments to continue on a comparable level in 2018. Likewise, the insufficient designation and therefore a limited availability of suitable greenfield plots will have a negative impact on the industrial and logistics space take-up in 2018. This becomes evident from the letting volumes in existing space, which have already plummeted by 30% in 2017. In face of the overall scarcity of industrial and logistics space, the companies in the Stuttgart Region are forced to either work with their existing space, or to look elsewhere for suitable facilities. Therefore, the tight market environment could be a further reason for the low space take-up of industrial companies in the previous year. At this point, local authorities are called upon to designate suitable sites for industrial and logistics use in the immediate vicinity of the region´s OEMs and their tier 1 suppliers. The prevailing negative preconceptions about logistics settlement must be challenged, because the logistics sector plays a key role for the competitiveness of the automotive industry in the entire Stuttgart Region. Next to the provision of a compatible road and IT infrastructure, also the availability of suitable industrial and logistics space will remain a core challenge for the economic success of the Stuttgart Region. Yours I 5

Facts & Figures. Letting Volume* Space Take-up Stuttgart Region in sqm Neubauflächen Brownfields**: Greenfields**: For the counties of the Stuttgart Region, E & G Real Estate has identified an overall space take-up in industrial and logistics space of ca. 240,600 square metres. Compared to a letting volume of 205,000 square metres in the previous year, this signifies a clear increase of 17.4%. In total, 68 industrial and logistics leases were signed in 2017. In the first six months, 37 new leases accounted for ca. 42% of the overall space take-up. The 31 signings in the second half of the year created a further 67.7% in letting turnover. For the sixth time in succession, the County of Ludwigsburg ranks first in terms of space take-up with a share of 55.3%, followed by the Counties of Goeppingen (14.3%) and Rems-Murr (10%) with significantly lower letting volumes. 165,000 40,000 240,000 65,500 217,000 58,000 172,000 27,500 210,000 25,400 205,000 31,300 2011 2012 2013 2014 2015 2016 240,600 Total Newly-built 121,700 2017 With an extraordinary letting volume of ca. 121,700 square metres for newly built industrial and logistics property, the result of the previous year (ca. 31,000 sqm) was outperformed by nearly four times. This letting class alone accounted for an overall share in 50.6%. A total of nine leases were signed for newly built industrial and logistics space in 2017. Except for one development project in Sindelfingen, all other properties were built-to-suit the respective occupier. In the reporting period, ca. 151,200 square metres of industrial and logistics property were developed on brownfield sites. On undeveloped greenfield plots, a total of ca. 135,500 square metres of newly built space was made available for industrial and logistics purposes. Tamm (County of Ludwigsburg): Logistics development for Bosch with ca. 38,000 sqm of hall space on a plot with ca. 73,000 sqm Freiberg (County of Ludwigsburg): Logistics property for Porsche/LGI with ca. 15,300 sqm of hall space on a plot with ca. 27,100 sqm Benningen (County of Ludwigsburg): Logistics complex for Müller-Lila Logistics with ca. 15,300 sqm on a plot with 27,100 sqm Sindelfingen (County of Boeblingen): Ca. 4,500 sqm of light industrial space for automotive engineering services on a plot with ca. 9,000 sqm Alfdorf (County of Schwaebisch Gmuend): ca. 13,700 sqm of hall space for TRW Automotive on a plot with ca. 27,300 sqm Vaihingen/Enz (County of Ludwigsburg): ca. 13,000 sqm of logistics space for DSV on a plot with ca. 26,300 sqm Sachsenheim (County of Ludwigsburg): ca. 8,000 sqm of hall space (two construction phases) for Draexlmaier on a plot with ca. 40,000 sqm Top 3 lettings > 5,000 sqm**: County of Ludwigsburg: ca.13,400 sqm rented to an OEM County of Goeppingen: former Geschmay Areal, ca.10,000 sqm of production space rented by an industrial company Letting volume 2017 by Counties Böblingen: 22.600 sqm (2016: 9.0 %) Esslingen: 16,300 sqm (2015: 20.8 %) Stuttgart: 10,200 sqm (2016: 18.5 %) Rent Levels 2017*** Net rent in EUR per sqm (existing space) Average rent in EUR per sqm (existing space) Net rent in EUR per sqm (newly-built space) Average rent in EUR per sqm (newly-built space) County of Böblingen 3.30 – 4.50 3,90 6.50 6.50 County of Esslingen 3.20 – 4.75 4,00 – – County of Göppingen 3.30 – 4.90 4,00 – – County of Ludwigsburg 4.00 – 6.00 5,30 4.90 – 6.50 6.10 County of Rems-Murr 4.50 – 5.60 4,85 5.00 5.00 County of Goeppingen: former Geschmay Areal: further 8,000 sqm of production space rented by an industrial company Rems-Murr: 24,100 sqm (2016: 11.6 %) Göppingen: 34,400 sqm (2016: 8.2 %) Total 240,600 sqm 55.3% Ludwigsburg: 133,000 sqm (2016: 31.9%) City of Stuttgart 3.70 – 6.50 5,40 – – Total 3.20 – 6.50 4,60 4.90 – 6.50 6.10 For existing industrial and logistics space in the Stuttgart Region, E&G Real Estate has determined a marginal decrease in average net rent from € 4.63 to € 4.60 per square metre. From what we can tell, the on-going shortage of letting products has created a demand for less attractive spaces in fringe locations of the Stuttgart Region and with lower net rent levels. Thanks to the construction activities in the Stuttgart Region, newly built property achieved a rent average of € 6.10 per square metre, which lies slightly above the figure from 2016 (€ 6.04/ sqm). Yet, the prime rents from that year (€ 6.75/ sqm) could not be reached again. Source: Research E & G Real Estate GmbH ©, Januar 2018 * exclusive of lease extensions /owner-occupiers ** I&L space without mezzanine/office/social space 6 I I 7 ** gewichtet nach vermieteter Industrie- & Logistikfläche; alle Preise pro Monat, netto/kalt

7 I Zahlen & Fakten. Owner-Occupiers Top 4 owner-occupier projects: Leases Total Letting Volume & Signings (Existing & Newly-Built Space) The space take-up by owner-occupiers accounted for ca. 169,200 square metres in 2017. This signifies an increase by 450% compared with the 37,100 square metres in 2016. In 2017, ca. 44,700 square metres (26.4%) of hall space resulted from acquisitions by owner-occupiers. With a share of 73.6%, project developments by owner-occupiers generated ca. 124,500 sqm of industrial and logistics space turnover. Sachsenheim (County of Ludwigsburg): distribution center by Breuninger with ca. 52,000 sqm Sachsenheim (County of Ludwigsburg): extension of logistics centre from Porsche with ca. 13,000 sqm Ditzingen (County of Ludwigsburg): Logistics centre for Trumpf with ca. 13,000 sqm The space take-up or owner-occupiers was determined for existing space upon contract signing and for project developments upon start of construction. Take-up of space by owner-occupier in sqm (purchase & own groove) Rems-Murr Stuttgart Göppingen E & G Real Estate has identified a total of 68 new leases in the Stuttgart Region (2016: 72 leases). 27 lease contracts were closed for facilities with 1,000 to 3,000 square metres, accounting for 18.3% of the overall space take-up. The highest share in letting volume (51.3%) was achieved in the segment with more than 10,000 square metres (7 signings). 54 of the 68 lettings in 2017 were supported by professional agents, an overall market share of 60.1% and 147,100 square metres in space turnover. This signifies a drop of 10.3% compared with the 70.4% (144,300 sqm) in 2016. As 14 leases with a total space take-up of ca. 93,500 square metres were closed directly, 38.9% of the lettings were concluded without agent´s support. E & G Real Estate has successfully advised 11 industrial and logistics lettings in the Stuttgart Region with a total space volume of ca. 43,900 square metres. This corresponds to a share of 18.2% in rented industrial and logistics space and a market share of 29.9%. 2016 2017 22 Signings 7.4 % 22 Signings 5.6 % < 1,000 m 2 33 Signings 29.3 % 27 Signings 18.3 % 1,001 – 3,000 m 2 11.6 % 6 Signings 8 Signings 12.6 % 3,001 – 5,000 m 2 Top Rents/Average Rents (existing space in EUR per sqm) 5.50 4.70 5.50 4.15 5.90 4,45 5.90 4.60 6.00 4.75 6.50 4.60 8 Sighnings 4 Sighnings 27.4 % 12.2 % 5,001 – 10,000 m² Top Rents 24.3 % 3 Signings 51.3 % 7 Signings > 10,001 m² Average Rents Esslingen 106.200 Ludwigsburg Lease Durations In the reporting period, commercial leases for industrial and logistics facilities had an average duration of around five years. Next to a few signings with shorter durations, only four leases with more than ten years were closed in 2017. For newly-built property, average lease periods currently lie at an average of 10 years, with individual lease durations ranging between seven and 15 years. 2012 2013 2014 2015 2016 2017 Top Rents/Average Rents (newly-built space in EUR per sqm) 6.60 5.55 5.90 5.20 5.30 5.30 6.20 6.10 6.75 6.03 6.50 6.00 Top Rents Average Rents 2012 2013 2014 2015 2016 2017 Source: Research E & G Real Estate GmbH ©, Januar 2018 8 I I 9

Demand In the reporting period, the greatest demand for industrial and logistics property came from the automotive sector (OEMs & suppliers) with a 51.3% share (ca. 123,500 sqm). A major part of this figure can be accounted to the large-scale letting of newly built logistics space in Tamm with ca. 38,000 square metres. Logistics service providers and freight forwarders ranked second with 19.9%, followed by the local industrial and manufacturing sector with 12% of the overall space take-up. Despite the high level of construction activity in the Stuttgart Region, the demand from industries, logistics and commerce has still not been met by a sufficient supply of large-scale, multi-functional hall space. One reason for this lies with the long development periods for logistics space. Re-developments on brownfield sites entering the market in 2017 had already been initiated several years before. In some cases, first talks between owners and developers took place five to seven years before construction. Often, environmental remediation and analyses, as well as changes in statutory requirements and reluctant approval processes have slowed down development dynamics. This means that projects on brownfield sites require some staying power on the developer´s side. Furthermore, the gap between demand and supply of suitable industrial and logistics space is most likely to continue in the coming years. At the same time, the letting rate of existing space went down by 31.5% from ca. 173,700 square metres in 2016 to only 118,900 square metres in 2017. Also this figure shows the on-going trend for limited supply of industrial and logistics space in the Tenants by rental area 2017 Others Trade Services Commerce Industrial Automotive/OEM Total 240,600 m² Logistics Tenants after conclusion of rental agreement 2017 Trade Commerce Industrial Others Logistics Automotive/OEM Services The Stuttgart Region:* A 8 direction Karlsruhe A 81 direction Singen Weil der Stadt Herrenberg Vaihingen a. d. Enz Leonberg Sindelfingen Schwieberdingen Ditzingen Böblingen Bietigheim- Bissingen Stuttgart A 81 direction Heilbronn County of Ludwigsburg Weilimdorf County of Böblingen Kornwestheim Leinfelden- Echterdingen Ludwigsburg Filderstadt Waiblingen Ostfildern Neckartenzlingen Esslingen Backnang County of Rems-Murr Winnenden Wendlingen County of Esslingen Nürtingen Schorndorf Murrhardt Kirchheim u. Teck Göppingen County of Göppingen Geislingen a. d. Steige Source: Research E & G Real Estate GmbH ©, Januar 2018 Stuttgart Berlin A 8 direction München industrial and logistics cluster * * logistics space < 50,000 sqm industrial space < 100.000 sqm 10 I I 11

Investments. As in previous years, institutional as well as private investors have shown a keen interest in industrial and logistics property. In 2017, a total of 12 transactions were concluded in the Stuttgart Region with an overall volume of ca. 147,200 square metres of hall and production space. Four newly built logistics facilities with a total of ca. 58,800 square metres were sold. A further two deals (ca. 34,100 sqm) were closed for properties older than three years. The remaining six transactions with a space volume of ca. 60,300 square metres concerned existing light industrial properties, mainly production and warehouse facilities without multi-functional characteristics. E & G Real Estate projects an overall transaction volume of ca. 185 million euros for the fiscal year 2017. In this reporting period, transactions for existing and light industrial properties were concluded with a WALT between four and thirteen years, whereas newly build investment products offered WALTs between seven and fifteen years. The demand for investments in logistics, but also for light industrial property in the Stuttgart Region will remain on a high level in the near future. Also beyond its regional borders, the extraordinary cluster of industrial, manufacturing and logistics companies in the southwest of Germany offers attractive investment opportunities in Core, Core-plus as well as value-add property. For industrial and logistics investments in the Stuttgart Region, E & G Real Estate has determined maximum gross initial yields of up to 5%. Against the backdrop of the given sellers´ market, returns can be expected to further decline a few basis points. Yet, compared with other industrial clusters, the Stuttgart Region still ranks among the top investment locations in Germany. Top 3 logistic deals: Ludwigsburg: logistics areal with ca. 27,000 sqm sold to an institutional investor (portfolio deal) Freiberg (County of Ludwigsburg): Newly built logistics facility with ca. 22,000 sqm hall space sold to Frasier Centrepoint (asset deal) Benningen (County of Ludwigsburg): Logistics development with 15,300 sqm of hall space sold to TH Top 3 light industrial deals: Magstadt (County of Boeblingen): Warehouse with ca. 17,000 sqm of hall space sold to Alpha Industrial (asset deal) Stuttgart: Storage/ production facility with ca. 12,400 sqm of hall space sold to Gold Tree Group (asset deal) Esslingen: Storage/ production facility with ca. 7,700 sqm of hall space sold to a private investor (asset deal) Top Yields for Commercial Property in % 10.5 10.5 8.0 7.5 7.5 7.5 7.5 7.57 .5 7.5 7.5 7.25 7.0 5.5 5.5 5.55 .5 5.5 5.25 5.0 5.0 5.0 4.6 4.6 4.6 6.8 6.25 5.0 5.7 4.5 4.25 4.25 5.8 5.5 3.8 5.5 5.0 3.8 Logistics Retail Centres 3.5 3.4 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Research E & G Real Estate GmbH ©, Januar 2018 12 I I 13

GPP-Market Date Germany 2017/2018. HAMBURG € 5.80 per sqm € 4.25 sqm 4.60% € 200-240 per sqm € 130-150 per sqm € 60-85 per sqm BERLIN € 5.00 per sqm € 4.30 per sqm 4.90% € 60-170 per sqm € 55-140 per sqm € 30-90 per sqm Grossmann & Berger GmbH Locations: Hamburg, Berlin Contact partner: Felix Krumreich Bleichenbrücke 9 (Bleichenhof) D-20354 Hamburg Tel.: +49 40/350802-528 Fax: +49 40/350802-574 DUSSELDORF € 5.40 per sqm € 4.60 per sqm 4.75% € 300-350 per sqm € 200-250 per sqm € 70-90 per sqm FRANKFURT € 6.20 per sqm € 5.40 per sqm 4.80% ANTEON Immobilien GmbH & Co. KG Locations: Dusseldorf | The Ruhr District Contact partner: Timm Georg Roche Ernst-Schneider-Platz 1 D-40212 Düsseldorf Tel.: +49 211/58589-80 Fax: +49 211/585889-88 COLOGNE € 5,00 per sqm € 4.80 per sqm 4.70% € 230-330 per sqm € 65-235 per sqm € 50-190 per sqm GREIF & CONTZEN Immobilien GmbH Locations: Cologne | Bonn Conatct partner: Frank Klähn € 130-185 per sqm € 80-145 per sqm € 70-100 per sqm STUTTGART MUNICH € 6,80 per sqm € 6.10 per sqm 4.60% Pferdmengesstraße 42 D-50968 Köln Tel.: +49 221/937793-450 Fax: +49 221/937793-77 € 6.50 per sqm € 6.50 per sqm 4.50% € 260-410 per sqm € 150-300 per sqm € 30-170 per sqm Legend Peak Rent Logistics* (City) Peak Rent Logistics* (Periphery) Net Peak Rent Plot Price** (City) Plot Price** (Periphery) Plot Price (Region) € 390-700 per sqm € 175-660 per sqm € 125-430 per sqm * Logistics: min. 5,000 sqm, min. 10 m clear hight, min 1 ramp/ 1,000 sqm, min. state-of-the-art, newly-built/ first letting ** Plots: GE/GW-area, min. 10,000 sqm, developed, free of contamination, nearly rectangular E & G Real Estate GmbH Locations: Stuttgart, Munich Contact partner: Markus Knab Börsenplatz 1 D-70174 Stuttgart Tel.: +49 711/2148-286 Fax: +49 711/2148-290 14 I I 15

Your Contact Partners. Our Services. The industrial and logistics sector has its own characteristics. In this field, you should rely on specialists who know the requirements for buildings, infrastructure and property down to the last detail: ELL- WANGER & GEIGER Real Estate. You will benefit from our expertise, our long-standing experience and our comprehensive services. Our team in Stuttgart looks forward to your call or visit. You can reach us at: Phone +49 711/2148-286 or Fax +49 711/2148-290. Informationen on the internet: www.ellwanger-geiger.de We consult investors and occupiers in all matters relating to industrial & logistics property. Canvassing and selling of suitable plots Pre-development of industrial & logistics projects Letting and selling of existing property Pre-letting, sale-and-lease-back Property valuation in accordance with national and international standards Markus Knab Head of Industrial & Logistics Properties Phone +49 711/2148-227 Markus.Knab@eug-re.de Alexander Fink Consultant, Industrial & Logistics Properties Phone +49 711/2148-261 Alexander.Fink@eug-re.de Alexander Deiss Consultant, Industrial & Logistics Properties Phone +49 711/2148-383 Alexander.Deiss@eug-re.de Proactive market research and market reports Tailor-made property consulting Our experienced industrial & logistics specialists will develop targeted solutions for your real estate projects. Our clients benefit from our property valuation services and inhouse market research to make well-informed real estate decisions. Penelope Vlahu Assistant, Industrial & Logistics Properties Phone +49 711/2148-286 Penelope.Vlahu@eug-re.de Alice Disam Assistant, Industrial & Logistics Properties Phone +49711/2148-278 Alice.Disam@eug-re.de Disclaimer This market report has been created with utmost diligence. Please understand that we cannot bear any liability for the correctness of the information and the interpretations given in the document. 16 I I 17

Entwicklungen 2015/2016 I 15 E & G Immobilien. E & G Real Estate offers you a one-stop shop for a comprehensive range of services relating ro the asset class of real estate. With the very highest discretion and integrity, we enable you to keep your bearings in rapidly changing markets. Our success is founded aboce all on excellent knowledge of the market and decades of experience in real estate business. Commercial Real Estate. Residential Real Estate. Our offices. GERMAN PROPERTY PARTNERS: LOCAL COMPETENCE NATIONWIDE. Systematic research form the basis for our analyses of location, portfolios and cost-effectiveness that reflect market conditions. From these, we derive strategies aimed at capitalising on potentials for earnings and efficiencies. In addition to comprehensive leasing services, our core expertise includes project consulting and transaction business. We adopt a hostic approach in consulting on real estate: we partner you all the way - from the development of marketing strategies to the preparation of data on properties and the implementation of marketing processes. Our services. As leading real estate agents in the Stuttgart Region, we know the residential property market inside out. Our success is based on the professional competence, commitment and experience of our property experts. They will take their time to understand your individual property needs and wishes.With our long-standing experience in residential real estate, we are able to provide an accurate valuation of your property as well as a detailed analysis of the potential target buyer group. On this basis, we strive to achieve the best market value for your property. Our services. Stuttgart, Börsenplatz 1 Phone +49 711/2148-300 München, Herzog-Rudolf-Straße 1 Phone +49 89/17 95 94-0 Esslingen, Pliensaustraße 7 Phone +49 711/310 5939-0 Sindelfingen, Planiestraße 15 Phone +49 7031/73 44 68-0 Waiblingen, Lange Straße 49 Phone +49 7151/98 243-0 German Property Partners - or GPP is a nationwide network for commercial real estate in Germany. GPP bundles the expertise of leading commercial property companies in a nationwide alliance for regional competence. National and international clients can profit from one face to the customer and from the local expertise of our partners. In short: one contact partner for all Big 7 property markets in Germany. Our services range from property investments to commercial lettings. For investors, we buy and sell industrial and logistics property all over Germany - as single asset or entire property portfolio. Due to the banking background of the founding members ELLWANGER & GEI- GER (Stuttgart/Munich) and Grossmann & Berger (Hamburg/Berlin), we are able to support your project developments also in financial aspects. No matter is you are looking for office, retail, industrial, or logistics space - with GPP you will always have a competent partner at your side. Find out more about the top 7 commercial real estate locations in our free-of-charge GPP Commercial Market Reports at: http://www.germanpropertypartners. de/en/market-survey/ Research Investment analyses and consulting Transactions, renting and leasing of office, retail, industrial and logistics space Market-relevant property valuation Coose analysis of target buyer group Professional support with contract negotiations and notarizations Nationwide network of regional property companies Strong market presence through our local shops Our further publications Stuttgart Office Market Report Stuttgart Investment Market Report Munich Office & Investment Market Report Immobilienmarktbericht Stuttgart & Region and other information materials may be obtained free of charge from: info@eug-re.com or www.eug-immobilien.com München • Stuttgart • Frankfurt • Köln • Düsseldorf • Berlin • Hamburg 18 I I 19

E & G Real Estate GmbH Börsenplatz 1, 70174 Stuttgart Tel.: +49 711/2148-300, Mail: stuttgart@eug-re.de Web: www.eug-realestate.com Amtsgericht Stuttgart, HRB 733293, Geschäftsführer: Mario Caroli, Björn Holzwarth

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