Updated Results of the IWIP Index 2019: Significantly Cooled Market for Industrial Real Estate

The main reason for this is the weakening of industrial production. This in turn is due to the weakening of the overall economy. This has increased the availability of land. At the same time, the consistently high demand of previous years made investments lucrative, which leads to an increase in the supply of space with a time lag. The resulting shortage of space, particularly for logistics space in the well-located locations of prospering regions, has thus been reduced, which is dampening the price development of both land prices and the rents offered. The main reason for this is that the users' willingness and ability to pay has reached its limit.

Rental dynamics differ in the three usage categories of warehouse, logistics and production. Rents for production halls rose most sharply in 2019. At 14.6 percent, the increase was at the level of the two previous years. At 2.2 percent, the second largest increase was in warehouses. As in the previous year, growth has thus slowed down considerably. Rents for logistics halls developed the weakest. Here, only a slight increase of 1.0 percent can be identified. The hardly upward trend of previous years thus continued. One of the main reasons for the particularly strong increase in warehouse and production halls compared with logistics halls is that the two types of hall, warehouse and production, are increasingly being used as logistics space for which a higher rent can be charged. This shows a great advantage of buildings that are simple and robust but allow for changeable uses.

Due to the hedonic approach of the IWIP index, rent developments for industrial properties can be broken down into their individual properties. This makes it possible to compare the market developments of the extremely heterogeneous halls. As can be seen once again, the most important explanatory variables for the level of rents are the quality, the location, the hall size and the price of building land.