Core markets dominate as demand shifts, says Trammell's Moser

Tenant demand in Germany is heavily concentrated in the top five core logistics markets, accounting for roughly 30% of all leasing activity, and the trend is expected to intensify.

Max Moser

Speaking to CRE Media Europe in Munich, Max Moser, senior VP Development Investment (Logistics Germany) at Trammell Crow Company (TCC), highlighted that, unlike the uniform high demand seen in 2022, there are now clear "losing markets," particularly in eastern Germany, such as Leipzig-Halle, characterized by high vacancy rates and recent construction.
According to him, speculative development is viable only in core markets and select locations, while land prices are escalating again due to developers also flocking to core markets. Development equity is still available, but investors are cautious. Deals must be well-priced and in the right locations, and offer an appropriate risk-return profile to be viable
Different financing options are available on the market, including utilizing capital partners with available funds or tapping into fund-level debt facilities provided by capital partners. Banks are cautious but will finance the right deals, often requiring a certain level of pre-leasing. Another option involves leveraging existing debt facilities, fund-level relationships, or established banking ties in suitable markets
Moser notes that while most people are positive about the market, he adopts a "cautiously positive" stance. "Germany needs to restructure its business model.  It has strong fundamental skills, is the fourth-largest global economy and the largest in Europe, and is greatly diversified. Germany's economy is physically healthy, with a 60-65% debt-to-GDP ratio, which is good compared to other Western developed economies. The government is trying to solve growth issues through a large fiscal stimulus package and increased defense spending”, he pointed out.
Moser pointed out that deals need to work based on current market assumptions, with downside protection. The goal is to deliver risk-adjusted returns for both TCC and its capital partners. There are mega-trends driving demand, such as relatively low e-commerce penetration compared to the UK. However, it's crucial to understand which markets work and which don't, he added.
Looking ahead, TCC is confident in the German market, where it has five projects under development, and aims to remain there long-term.
At the macro level, Moser foresees a recovery in the investment market, noting a stabilization in yields.  Given the strength of the German economy relative to others in Europe, TCC expects increased capital allocation to Germany, which would benefit developers familiar with the local market and able to communicate effectively with the predominantly Anglo-Saxon capital currently active there. 

Branislav Pekić