04.10.2018 by Rainer Koepke

Why leasing logistics properties is not a breeze

A marketing concept for logistics properties does not seem necessary given the current market situation. However, if you want to successfully place your property on the market in the long-term, you must distinctly position it.

Leasing managers of warehouse and logistics spaces currently have little cause for complaint: the rental market is booming for big-box logistics properties as well as for smaller city logistics units and mixed-use commercial properties with a high logistics proportion. Demand comes from classic parcel service providers, industrial companies and specialists for the growing segment of spare parts logistics. Many medium-sized companies and start-ups also need modern logistics space. The Industry 4.0 and e-commerce technologies are also restructuring the supply chains, which is why relocation is necessary in some cases.

Warehouse and logistics spaces are still in great demand.
Warehouse and logistics spaces are still in great demand.

The high demand is also reflected in the figures: Of the 3.4 million square meters of logistics space taken up in the first half of 2018, 2.2 million square meters were leases – an increase of 26 percent. Take-up fell by 17 percent in the same period in the top five cities, i.e. Berlin, Munich, Hamburg, Frankfurt/Main (including surrounding areas) and Dusseldorf. This is caused by the acute shortage of land and the blatant lack of rental space rather than declining interest. This is associated with an increase of two to three percent in rent levels in these cities over the past twelve months.

It is important to create long-term foundations

Logistics properties developers who can secure one of the sought-after lots in urban areas have the option of a speculative development – or carrying out a brownfield revitalization respectively. They generally find a tenant after only a short marketing period. Considering this, it is justified to ask what role marketing plays in logistics spaces in the context of a new development or revitalization.

„It's not only a matter of
branding and storytelling"

Long-term success in particular makes distinct positioning on the local logistics properties market indispensable. After all, the property should remain suitable for third-party use and rentable over its entire life cycle – even if there is a downturn in the rental market. And the changing space requirements, which are currently the reason for a tenant moving into the property, may require relocation in a few years, even given good tenant care and contractual flexibility.

Marketing is becoming interdisciplinary

As a result, ever more developers are beginning to involve a real estate service provider specializing in marketing as early as the planning phase – even if a specific rental request already exists or the property is to be developed as a build-to-suit solution. The interdisciplinary approach is what matters here. It is therefore not only about branding and storytelling: on the basis of existing market and research data, the consultant designs a location-specific needs analysis for the developer, which among other things also illustrates the region’s demographic and economic development. In addition, the respective distribution network should be clarified in detail.

Subsequently, the project developer should be supported in the development of a property strategy tailored to the demand profile. This includes concrete recommendations for action with regard to space types, sizes and layouts as well as estimates of realistic rental levels and lease terms. Feasibility analyses can be carried out for already existing project plans. The property's specific advantages are subsequently worked out and assigned to potential user profiles. Based on this work during the planning phase, the leasing agents can address the relevant target groups after commissioning, even in the case of unexpected vacancies.

Inspiration from shopping centers & co.

The challenges that the marketing of logistics and warehouse properties could bring in the future can be clearly seen from other types of commercial properties – especially retail properties. Shopping center managers must be represented on all target group-relevant social media platforms and, ideally, directly on customers’ smartphones. Although there is no need to create a separate app for each business park, potential tenants could be reached via the industry-relevant networks in the future. Even if there are still no practical examples in the industrial or logistics sectors, the relevant pioneers of other types of use should be closely monitored.