Infrastructure transformation creates new investment opportunities
Large-scale infrastructure projects offer new logistics opportunities in Germany as sector looks to cleaner, alternative transport methods.
4 minutes to read
Germany is one of the key logistics markets in continental Europe due to its central location and connectivity. The most established logistics corridor in Europe, the so called ‘Blue Banana’, runs through the Rhine-Alpine trans-European transport network (TEN-T) network and includes major economic centres including the German Rhine-Ruhr and Rhine-Neckar regions. Furthermore, major European routes run through Germany connecting European metropolitan areas.
Investment opportunity
German logistics real estate has evolved from a niche investment product into a sought-after investment product. The German industrial investment volume amounted to nearly EUR 8.0 billion in 2021, according to Real Capital Analytics, which represents another record result after 2017. Well-connected locations offer opportunities in or near major urban centres with high population densities where competition for land is strongest and supply of industrial and logistics stock is most constrained.
Due to high prices and a lack of land in prime locations, investors and developers alike are looking for alternative locations with excellent connectivity and a large catchment population within a relatively short drive time.
High freight transit
Motorway density is particularly high in the border region to the Benelux countries that are part of the Blue Banana corridor and in the major cities and transport hubs Hamburg and Berlin, according to Eurostat. This is due to the proportionally high transit freight traffic and the proximity to key economic centres which indicates the ease of transport of goods to distribution centres and warehouses by road.
The transport of goods by road is, however, a major contributor to carbon emissions. Driven by decarbonisation policies and large-scale infrastructure investment, more sustainable modes of transport are becoming increasingly more important for the logistics industry creating new opportunities for the sector.
The trans-European transport network (TEN-T) requires an investment of EUR550 billion over 2021-2030, according to the European Commission. The full implementation of the TEN-T core network could lead to an additional GDP increase of 1.6% by 2030 and CO2 reduction of 12.5 million tonnes in 2030, M-Five GmbH estimates. Germany is expected to receive €42 billion of TEN-T funding in 2021-30, according to the European Commission. Rail is projected to be the fastest growing freight mode in Europe in 2020-2030, according to the OECD, as trains produce three times less emissions than road transport.
Changing transport methods
As part of the TEN-T investment programme, several cross-border rail centric projects are taking place. The Fehmarn Belt Tunnel connecting Denmark and Germany, and the Brenner Base Tunnel from Austria to Italy both belong to the Scandinavia – Mediterranean core network corridor, the longest one connecting 25 core network ports, 19 core network airports, 44 road/rail terminals and 18 urban core network nodes. The Fehmarn-Belt Tunnel and the Brenner Basis tunnel are projects to optimize transport routes and times which will increase freight capacity.
The Fehmarn Belt Tunnel which is going to replace the ferry connection will help integrate the peripheral Nordic locations into Central Europe and is expected to create new logistics opportunities for longer-term investors in the Hamburg and Schleswig-Holstein regions in Germany, the Copenhagen region and southern Sweden strengthening the ‘Green Banana’ logistics corridor.
This will offer opportunities for logistics investors and developers alike as there is a need for new multi-modal warehouse facilities accessible by different transport modes around existing and emerging infrastructure hubs. For long distances freight transport by rail and inland waterways will increasingly provide an alternative to road transport but low-carbon intermodal links are crucial for goods to reach their destination.
Since April 2021, DHL and DB cargo have launched seven new rail freight connections in the German network and aim to increase the share of parcels transported by rail from 2% currently, to 20% in the long-term, RailFreight reports. This will require more distribution facilities accessible by rail along the network.
Competing internationally
In the longer term, the previously mentioned Fehmarn Belt Tunnel project which will reduce rail travel time between Hamburg and Copenhagen by two hours is expected to create new logistics opportunities in the Hamburg and Schleswig-Holstein regions in northern Germany. The North Sea ports of Hamburg, Bremen/ Bremerhaven, and Wilhelmshaven are planning to merge, Handelsblatt reports, to be able to compete internationally with Rotterdam and Antwerp which could increase the demand for logistics space around these port locations.
The future of logistics
In both established and emerging logistics hubs, the key theme is the modal shift of road freight transport towards rail and waterways. This shift has been long anticipated but with increasing focus on environmental considerations and decarbonisation commitments from governments, occupiers, and investors we expect a material acceleration.
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