After approximately two years of reluctance for logistic properties, Germany’s investment market has been recovering in that sector in 2010.

During the financial crisis with its peak in 2009, Germany presented itself still as one of the most stable economies in Europe. According the experts, one of the major reasons for that was the fact that the country is based on a substantial economy with a vital production cycle and goods, instead of “artificial business sectors” with a dependence on the fragile financial system.

In times of recovery the export of these goods increases quickly and as such there is a growing demand for stocks and the need of companies for warehousing. As a consequence more companies decide to settle down at one specific location, in order to centralize their logistic processes for a very long-term. As a matter of fact, Germany additionally is ideal for such settlements, being located in the middle of Continental Europe.

The result of this situation is the development of classic products for German open-ended funds: single-tenanted, state-of-the-art and sustainable buildings with lease contracts lasting more than 10 years. For these properties at AAA locations such as the Hamburg port, Frankfurt airport or the Northern area of Munich gross yields of close to 7.00% are evident again compared to yields of almost 7.70% at the beginning of 2010 and even higher in 2009.

With the recovery continuing, the outlook for the next year is positive. Nevertheless, reaching yields of 6.25% like in 2007 and 2008 is unrealistic, as the major players of this investment market are not the financing-driven and semi-professional players from abroad but conservative German investors with a clear focus on core real estate products.

-Lenny Lemler

Lenny Lemler is an Investment Consultant with NAI Apollo Frankfurt.