LIP Invest reports stable logistics real estate market in Q2 2025 despite financing constraints

LIP Invest, a specialist fund provider in Germany’s logistics real estate sector, has released its latest quarterly market report, LIP UP TO DATE – Logistikimmobilien Deutschland, summarising key developments in the second quarter of 2025. The report includes data on investment volumes, leasing activity, new construction, yields, and financing trends. It also provides an outlook for the third quarter.

The German logistics real estate investment market during Q2 2025 was marked by high supply dynamics and an increase in individual transactions. A growing number of property owners have shown a willingness to sell. However, despite robust supply, the financing environment continues to act as a constraint on investment activity. According to Sebastian Betz, Managing Partner at LIP Invest, banks have imposed high financing margins and mark-ups, making many debt options unattractive and delaying purchases. While the European Central Bank has reduced short-term interest rates as anticipated, the benefit has been felt primarily by developers rather than long-term investors. Long-term interest rates remain elevated and volatile, with 10-year financing rates between 3.60% and 3.80% currently seen as workable.

On the leasing side, demand remains stable. Some logistics companies are expanding through new leases, while others are relying on existing operations. Although the recent trade agreement between the EU and the US has helped ease uncertainty, the long-term effects of the new tariffs remain unclear. Nonetheless, slightly improved economic forecasts for 2025 and 2026 are viewed positively by the industry.

In terms of investment, approximately EUR 1.4 billion was allocated to German logistics assets in the second quarter, bringing the total for the first half of the year to EUR 2.6 billion. This is slightly below last year’s figure for the same period, largely due to a lack of large portfolio transactions or delays in finalising such deals. Nevertheless, the number of individual transactions remains high. One example is the sale of XXXLutz’s regional distribution centre in Groß-Gerau for EUR 22 million.

Prime yields for new logistics assets increased slightly in the second quarter, ranging from 4.90% to 5.10%. While the 10-year swap rate rose marginally over the past three months, additional bank premiums continue to drive up overall borrowing costs. LIP reports a notable increase in properties offered for sale, with a total volume of EUR 1.3 billion in Q2. This growing supply could support higher transaction activity in the coming months.

Leasing activity in the logistics space market totalled 1.4 million square metres in Q2, bringing the total for the first half of 2025 to 2.6 million square metres. This indicates a continuation of stable demand. Chinese logistics companies, which previously operated as subtenants, are now increasingly securing warehouse space directly. For instance, SK Express Germany, a subsidiary of Chinese logistics firm Shaoke, leased 40,000 square metres in Greven and now operates 68,000 square metres of space in North Rhine-Westphalia.

New construction activity remained moderate, with 800,000 square metres completed in the second quarter and 1.55 million square metres for the half-year. Among the developments, Panattoni began construction on a logistics property in Lübeck, with a significant portion pre-leased to medical technology company Dräger. Demand from pharmaceutical and healthcare companies is growing, prompting logistics providers to adapt. In May, DHL opened a 30,000 square metre logistics centre in Florstadt, Hesse, designed specifically for the distribution and storage of pharmaceutical goods across various temperature zones.

LIP also identified parcel distribution as one of the fastest-growing segments within the logistics sector. The courier, express, and parcel (CEP) market has continued to expand, following only a brief slowdown after the pandemic-related surge. According to a study by the German Parcel and Express Logistics Association (BPEX), shipment volumes are expected to surpass 5 billion units by 2029. Additionally, trends in e-commerce suggest that international imports are increasingly being replaced by local fulfilment solutions. This shift is likely to generate further demand for distribution and fulfilment centres, particularly in regions such as North Rhine-Westphalia and Bremen, which have access to sea routes and serve as strategic logistics hubs.

Photo: Sebastian Betz, Managing Partner of LIP Invest