Supply and demand in logistics: who has the power?
In the dynamic world of logistics in Germany, a notable transformation has taken place to favour the owner. Germany now relies heavily on efficient logistics networks to sustain its industrial growth and global trade which has propelled demand. With the call for storage facilities, online shopping, distribution facilities and transportation hubs it has created a supply-demand mismatch, where the supply of available properties falls short.
This finds landlords in an enviable position, with newfound leverage in negotiations. Rental prices in many cases are soaring to record highs. Tenants are compelled to navigate a landscape where property owners dictate the terms. Logistic assets offer stable returns and long-term rental commitments, further consolidating their power. We are seeing many tenants extending their contracts rather than entering into new negotiations. Some even rent smaller spaces to not risk paying a fee to leave an agreement or seek refuge in alternative locations.
Amidst this landscape of rising rents and competitive pressures, secondary locations emerge as beacons of opportunity. Leipzig is a rising star in the logistics hierarchy, with robust infrastructure and lower overheads in comparison to Frankfurt. Highlighting the potential of “B and C” locations to offer variable alternatives amidst urban sprawl.
The pursuit of profitability and the promise of stable returns continues to attract investors to the logistics sector. This influx of capital intensifies competition and further tips the scales in favour of property owners, as they capitalise on the demand for logistics real estate.
In conclusion, previously the tenant had the better negotiation but this has drastically changed. Could this influence a lot more companies to hold onto their logistic assets and rent them, rather than sell? The prices for new buildings will rise and it will be a while until we can say there is no new rental space missing for logistics. In all of this, we will see opportunities for innovation and growth in secondary locations. In the long term, as secondary locations become more popular, this could push tenants even further out…