Germany is one of the largest markets in Europe. Besides, this country is one of the most attractive logistics markets in the world. This is mainly due to the location in central Europe, but not only. Germany boasts a highly developed infrastructure, technology at the highest level, and warehouses that are ahead of most European countries in size and quality.
That is why logistics is very important in the German economy. However, it faces many challenges. Let’s find out what’s at stake.
Warehouse market in Germany
The warehouse market in Germany, not only in the Berlin region, witnessed a substantial decline in take-up during the first half of 2023. Approximately 119,000 square meters of warehousing and logistics space were leased during this period, representing the lowest half-year result in the past decade. This decline was mainly attributed to the absence of owner-occupier deals and a stark contrast to the record take-up registered in 2022, driven primarily by the significant Tesla deal in Grünheide.
Source: JLL
In the first half of 2023, the German warehousing and logistics market absorbed around 2.05 million square meters. This represents a 58% decline over the same period last year. The decline can be attributed to several factors, including:
- a shortage of available space,
- limited supply,
- and the absence of speculative properties.
Source: JLL
Moreover, the Big 5 conurbations in Germany, including:
- Berlin,
- Düsseldorf,
- Frankfurt,
- Hamburg,
- and Munich,
witnessed a notable decline in warehousing and logistics space take-up in the first half of 2023, with only about 655,000 square meters being leased, marking a ten-year low.
This resulted from the absence of leases for units larger than 20,000 square meters, with only three such deals concluded in the first half, down from 14 in the same period last year. Munich was the exception, experiencing a slight increase of 8% with a take-up of 120,000 square meters. In contrast, all other regions performed below the yearly average with:
- Hamburg seeing a 40% reduction,
- Frankfurt down by 25%,
- and Berlin experienced the most significant year-on-year decrease at 85%.
Only 254,000 square meters of new warehousing space were completed in the first half of 2023, a 70% decrease compared to the previous year. Construction activity is primarily focused in the Hamburg and Berlin regions.
As the logistics markets are currently impacted by economic weakness, thee are reduced demand from retail companies. However, the primary issue causing the decline in take-up is the shortage of available supply. Many companies are opting for lease extensions or lease options due to a lack of alternative space or as a cost-saving measure.
Will the situation remain so unpleasant? Don’t worry. According to the report from Expert Market Research, the market will grow at a healthy rate in the forecast period of 2024-2032, reaching USD 17.9 billion by then.
Why in Germany?
Dynamic development of the global e-commerce market has posed a considerable challenge to the logistics segment. A larger number of orders requires that transport become more efficient and faster. Customers don’t like to wait for their orders for too long. That is why Germany has become such a popular spot on the logistic map of the world.
First, by their geographical location, they connect Western Europe with its eastern part. Second, this market is attractive for third-party logistics – in 2023, third-party logistics (3PL) will generate revenue of €36.47billion. Third, the quality of the roads and the length of the highways are at the highest level. In 2022, a total investment of approximately EUR 13.6 billion was made in rail infrastructure by Deutsche Bahn, the federal government, and local and regional governments. Also, Lower Saxony, Hamburg, Bremen, Mecklenburg-Western Pomerania, and Schleswig-Holstein, have a focus on modernizing their rail networks by 2030.
Source: Mordor Intelligence
Challenges
Germany’s logistics sector has been navigating a changing landscape. In the first quarter of 2023, investment in industrial and logistics assets reached €848 million, marking a slow start compared to previous years, mainly attributed to ongoing market pessimism since mid-2022.
The surge in e-commerce during the pandemic placed immense pressure on the sector and indicators, emphasizing the need for efficient, faster transportation to meet increasing consumer demands. However, the production efficiency and logistics boom has tapered off, with well-filled warehouses and extremely low vacancy rates.
While talk of supply chain reshoring has been ongoing, it hasn’t significantly impacted the logistics market’s take-up, largely due to the absence of available space in prime locations and limited speculative construction. The industry continues to adapt to the evolving demands and challenges in the logistics landscape.
Freight villages
Have you ever heard about freight villages? In German known as Güterverkehrszentren or GVZ. Government agencies in cooperation with the logistics sector have created freight villages to maximize the efficiency of German infrastructure. How does it work? Villages operate on the principle of cargo handling centers. They have access to local delivery points and highway networks, thanks to which the whole process is faster. In GVZ, you can also go through customs clearance or check whether the technical condition of the vehicle allows you to continue the journey.
Some freight villages in Europe:
Pick By Voice – more eco, more efficient
Europe is moving with the times also in the logistics sector. Pick By Voice is already present in most warehouses of larger companies, also in Germany. Pick-by-Voice is a technology that’s gaining popularity in Germany’s logistics landscape. This voice-guided picking system enhances operational efficiency and ergonomics by replacing paper lists and handheld barcode scanners with voice commands. It maximizes productivity, allowing warehouse staff to focus on picking items accurately and quickly.
The technology seamlessly integrates into existing IT systems, enabling smooth communication with warehouse management systems (WMS) or yard management systems (YMS) and ERP solutions. This adaptability results in a significant quality and performance improvement in the picking process in a short time. With hands-free, voice-activated instructions, the system minimizes the need for training, making it an excellent solution for a dynamic and efficient logistics environment.
Germany’s logistics industry is embracing Pick-by-Voice technology to improve its processes, streamline operations, and meet the demands of modern, fast-paced supply chains, ultimately boosting productivity and accuracy.
Conclusion
Germany stands as one of Europe’s largest and most attractive logistics markets, primarily owing to its location and exceptional infrastructure. With advanced technology and warehouses that surpass those in most European countries in size and quality, logistics plays a vital role in the German economy. Nevertheless, this thriving sector confronts numerous challenges.
In the first half of 2023, the German warehouse market experienced a substantial decrease in take-up, largely due to factors such as a scarcity of available space and a lack of speculative properties. The Big 5 conurbations faced a similar decline, with only Munich showing a slight increase.
The logistics boom has slowed, however, Germany’s logistics sector continues to adapt, emphasizing innovations such as Pick-by-Voice technology to enhance productivity and accuracy, ensuring it remains a dynamic player in the evolving global logistics landscape.
