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German Industrial Property Rentals Drop on Economic Uncertainty

Demand for warehouse space in Germany fell in the first quarter as companies signed fewer leases amid concern that Europe’s largest economy may take longer than expected to recover.

Companies agreed to rent 619,200 square meters (6.69 million square feet) of industrial properties, 29 percent less than year earlier, broker Jones Lang LaSalle Inc. said in a statement today.

“It’s mostly due to weaker demand because the signings aren’t there, but there’s also a lack of supply,” Rainer Koepke, head of German industrial properties at the Chicago-based firm, said by telephone. As a result, average rents in Germany’s five biggest cities rose 2.5 percent to 4.53 euros per square meter, JLL said.

Business confidence in Germany unexpectedly fell from a 10-month high in March and a report today showed a further drop in April. The country’s economy may have entered a recession in the first quarter after unseasonably cold weather in March dragged on growth.

While lease signings slowed, more companies built their own warehouses. Industrial property construction by warehouse operators such as retailers and shippers rose 43 percent to 679,000 square meters, Jones Lang said.

Combining lease signings and new construction, total take-up of industrial space fell 4 percent to 1.3 million square meters. Full-year take-up will probably be 4.3 million to 4.7 million square meters, compared with 4.7 million in 2012, JLL said.

“The total will only reach last year’s level under a best-case scenario,” Koepke said in the statement.

Construction by warehouse operators will probably rise, while lease signings will continue to fall, he said.

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