Logistics Facilities in Bremen – Can the Hanseatic city hold its own against the market trend?Real estate
The market for logistics properties in Bremen 2023
High interest rates, soaring rents, faltering supply chains and low consumer demand: does this mean the end of the good times for the once record-breaking logistics facilities sector? How is Bremen doing as a property hotspot and how can it safeguard its future?
The German market for logistics facilities experienced a significant decline in the fourth quarter of 2022 and in the first half of 2023. In Germany as a whole, the latest statistics revealed a 46 reduction in take-up when compared with the previous year, 15 percent less than the long-term average. Other figures point to the lowest number of new construction projects for five years.
How do things look in Bremen, whose warehousing space in excess of over three million square meters makes it an important player in the German logistics market? Björn Sundermann, Project Development Director at Robert C. Spies Industrial Real Estate, believes that the (nightmare) scenario in Germany as a whole has not been felt quite so keenly in the Hanseatic city. Although there is still a lack of reliable figures, he thinks the situation in Bremen isn't quite so drastic: "I wouldn't necessarily want to describe it as a "collapse". It's clear that we're experiencing a downturn due to a certain amount of hesitancy in demand in Bremen and the wider region. However, the very strong small and medium-sized business sector continues to be the driving force in Bremen's economy, especially in manufacturing, and has shown itself to be exceptionally resilient when faced with these challenges."
Sundermann believes that the downturn is not only due to the sharp rise in rents, up by as much as 20 percent in a single year, but also the prevailing interconnected geopolitical conditions which have made their presence felt: the war in Ukraine, unstable supply chains and high inflation rates. "Obviously, all of this has had an impact, especially in the e-commerce and retail logistics sectors."
This assessment is shared by Roger Heidmann from Logistik Service Agentur LSA a logistics service provider in Bremen. "We're seeing increasing divergence between customer demands and what the investors want." This is apparent in the length of rental contracts now being asked for and also in the demands on properties themselves. Concerning premises, In this case, the primary concern for many customers is to have facilities which they can use to best effect, whereas investors are looking for low construction costs, high returns and long-term viability. This is also how Sundermann views the situation: "Although investors have clear requirements for properties when it comes to ESG (environmental, social and governance), long-term viability and use by third-parties, these are not issues that concern the vast majority of customers to the same extent."
According to Sundermann, this situation only changes when large properties are involved. An example of this is the C3 logistics centre for BLG LOGISTICS, which opened in Bremen's Cargo Distribution Center (GVZ) in early 2023. Boasting Germany's largest roof-mounted photovoltaic system, an integrated energy strategy and policies which pay particular attention to the well-being of employees, this 82,500 square metre facility really does set new benchmarks.
In Bremen, the Cargo Distribution Center (GVZ) is still the address of choice: "With projects such as C3, the GVZ clearly underlines its preeminent position. This flagship project has brought Bremen widespread public recognition as a logistics hub. This is good for the city and will help also keep demand at a high level. Jörg Lachmann, founder and Managing Director of Lachmann & associates, thinks this is also a reason why Bremen has been less affected by the downturn than other places". Lachmann, a Bremen real estate expert, sees long-term sustainability as an important issue for the future and ascribes the current weak state of the market to a combination of high interest rates, rising rents and associated costs and a lack of demand in the consumer goods sector.
Viewing lack of space as a future opportunity
The current economic climate is further hampered by the fact that all logistics facilities in Germany now face similar challenges: the amount of space on offer is diminishing and new land is allocated grudgingly to prevent urban sprawl and the proliferation of surfaces that do not permit rainwater runoff. "This is where we need bold development plans so we can meet future demands", stated Roger Heidmann. In Bremen, it's the 2030 Economic Development Plan that will create the conditions for this. "Even the new regulations won't prevent the logistics business from expanding in future."
Heidmann sees five possible pathways for the future:
- Optimising intralogistics. This means making better use of existing facilities by introducing intelligent warehousing strategies or shortening routes (improving the use of space can shorten routes from 30 percent to 20 or 25 percent)
- Better use of existing buildings by changing legal terms and conditions, for example, so that empty inner-city hardware stores can be used for logistics purposes
- Multi-storey logistics facilities that intelligently combine production halls with warehousing space
- Better use of available parcels of land
- Encourage brown field investments to exploit disused and neglected areas that fall outside the standard.
These approaches have been warmly received in Bremen. Under the headline "Business locations for the future", Bremen is focussing on climate protection, adaptation to climate change and biodiversity in the design of new and existing commercial sites. Making better use of existing buildings and space is a step in the right direction.
Sundermann, Managing Director of Robert C. Spies, agrees: "In addition to developing new greenfield plots, we must also investigate and exploit the potential of existing sites and put greater emphasis on the revitalisation of brown field sites."
These measures could put Bremen in an excellent position to be an effective logistics hub that's fit for the future: "Bremen should continue focussing on infrastructure projects and site development strategies. This includes pressing ahead with measures such as completing the A282 ring road, finishing the next stage of the expansion of the Hansalinie industrial estate and, in particular, developing the Achim-West inter-municipal industrial zone. A vital political and administrative precondition for all of this is shortening the approvals process. If we can work together with politics and industry on this, Bremen will continue to be a very attractive location for companies of any size."
Added to this are the innovations that are another driving force in the sector, added Roger Heidmann: "If you can double productivity, you only need half the space. Digitalisation and intelligent solution can help us achieve this. So can new building designs. Why shouldn't we develop a style of building in Bremen that is perfectly tailored to the needs of our Hanseatic city? Using space more effectively also reduces CO2."
Cutting CO2 emissions is most definitely an issue that addresses our future needs, agreed Jörg Lachmann. "ESG (environmental, social and governance) criteria are becoming ever more important in logistics. This started with the large companies, but it will also affect smaller businesses soon. If Bremen can focus on identifying trends ahead of time and driving forward innovation, it will continue to be fit for the future."
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