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The real estate market is considered crisis-proof.
But there are exceptions.
This includes industrial properties, the rents of which fell by an average of 2.2 percent in 2020 compared to the previous year.
The reason for this is the pandemic, which led to a 10.8 percent decline in nationwide industrial production, says Peter Salostowitz, managing director of Industrialport, a consulting company for warehouse, logistics and production properties.
Compared to the pre-crisis period, when there were significant rent increases, the situation on the market for industrial real estate has visibly changed.
Bad facilities, bad location
"In the largest usage segment of the warehouses, rents fell by 3.9 percent in 2020 compared to the previous year - primarily triggered by properties with poor facilities and in a worse location," said Salostowitz.
Rents for production halls fell the most in the past year, at minus 12.9 percent.
These rents followed the fall in industrial production.
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Only the rents for logistics properties are defying the recession.
Contrary to the market trend, they have increased by 5.4 percent compared to the previous year.
According to Salostowitz, the reason is the booming online trade and the associated increased demand for city logistics halls in the conurbations and last-mile locations, i.e. warehouses from which goods are transported to the end customer.
Outside the metropolitan areas, however, price declines were often observed.
The slump in orders in the automotive and mechanical engineering sectors would have an impact here.
“In many places, significantly more halls that had become vacant were offered on the market due to a drop in orders than in previous years.
Marketing of the halls was usually still possible, as there was still great demand in many sub-segments of the market, ”said the real estate expert.
This demand is due to catch-up effects and additional space requirements due to Corona.
“The sudden shift in local supply and traditional retail to e-commerce has generated new demand.” However, the situation in the automotive industry is not looking so good.
"Drop in orders hit hard"
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At locations such as Stuttgart, large numbers of lightweight construction halls are being rented from car companies and their suppliers because the space requirements have decreased.
"It's similar to that of temporary workers, who also have to leave when the order situation worsens," says Salostowitz.
Ralph Henger, real estate expert at the Institut der deutschen Wirtschaft (IW) in Cologne, considers the price slump to be manageable so far.
"The 2.2 percent decline shows the resilience of the previously booming market segment for industrial and logistics real estate," he says.
The direct effects of the corona pandemic are extremely different.
While last-mile delivery and online trading were in high demand for food and pharmaceutical products, other segments had to give up.
"The slump in orders in the automotive and mechanical engineering sectors is having a hard impact," says Henger.
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IW and Industrialport have jointly recorded rental price developments for industrial properties for four years and use the collected data to determine the IWIP index.
The current index includes around 9,500 rental offers for industrial properties from 2019 and 2020.
Recovery is not in sight
The market for industrial and logistics halls is strongly affected by the overall economic development.
Nevertheless, it is remarkable how comparatively well the rental market has come through the crisis so far, while other segments of the real estate market such as retail or hotels have partially collapsed, says Henger.
Will it stay that way in the future?
“I don't see why we should expect a recovery for industrial real estate in the near future.
This means that there are no big increases in rents, ”says Salostowitz.
New impulses such as last year from demand from the pharmaceutical and medical sectors or the expansion of online trading are not to be expected.
This applies to the logistics real estate, which has kept the industrial real estate market segment afloat so far.
And there is no sign of any greater demand for production and storage facilities in the manufacturing sector.
On the contrary, the change in the automotive industry to electromobility or rising energy costs in Germany created negative impulses for industrial real estate.
“The demand for logistics objects is currently still good,” says IW man Henger.
“But the prospects are uncertain.” That also depends on what happens in the next six months.
According to the Federal Statistical Office, the German gross domestic product fell by an annual average of five percent in 2020.
This is as strong as in the financial crisis in 2009, when the economy shrank by 5.6 percent.
But whether the economy is about to see a recovery that is as strong as it was a decade ago?
Ultimately, the economic situation also determines the prospects for industrial real estate, says Henger.
Supply chains will shift
After the lockdown that was extended to April, his IW expects growth of only three percent for 2021 and four percent for 2022. The above-average decline in industrial production in 2020 as a whole by 10.8 percent and in 2019 by 3.5 percent is in the second half of the year A significant revival followed in 2020.
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High incoming orders provided stable production prospects for 2021 - with great risks.
It is positive that the renationalization of international value chains discussed in the previous year has not yet started.
Henger: "However, a large number of different change processes are currently running at high speed, so that it is not yet possible to foresee how the supply chains will shift."
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