Germany faces a shortage of space in logistics – Lack of space jeopardises Germany’s competitive position

What does the paradoxical situation of the German economy mean for the logistics industry?

The German economy finds itself in a seemingly contradictory situation: while the gross domestic product is stagnating or even shrinking, a massive shortage of logistics space is simultaneously emerging. This paradox raises fundamental questions about the structural problems of the German economy and their impact on its competitiveness.

The German economy contracted for the second consecutive year in 2024, by 0.2 percent, following a 0.3 percent decline in 2023. At the same time, the data shows a continued demand for logistics space, resulting in limited supply and rising rents. This development suggests that the stagnation of the overall economy does not necessarily equate to a decrease in logistics requirements.

The causes of this stagnation are manifold and primarily structural. High energy costs, increased interest rates, growing international competition, and political uncertainties are weighing on the German export sector. German production potential is more than five percent below the figure projected for 2024 in 2019. These structural challenges are creating an environment in which companies are holding back on investments and expansion plans, while simultaneously having to optimize and modernize their existing supply chains.

The demand for space in logistics is driven by several factors that operate independently of the general economic situation. The e-commerce boom, even though it has cooled somewhat, continues to require decentralized logistics structures. At the same time, restructuring processes in industry, particularly in the automotive sector due to the shift towards electromobility, are leading to additional space requirements.

How has the German logistics real estate market developed in recent years?

The German logistics real estate market has undergone remarkable development in recent years, characterized by sustained demand coupled with limited supply. This development is reflected in sales figures, price trends, and structural changes within the market.

In recent years, the volume of logistics real estate leased in Germany has fluctuated between 5.7 and 6.9 million square meters annually. For the first half of 2025, 2.7 million square meters have already been leased, representing an increase of almost eleven percent compared to the previous year. These figures demonstrate that, despite the economic challenges, demand for logistics space remains stable.

The developments in the major logistics hubs are particularly noteworthy. While these traditional markets dominated the scene for a long time, they have experienced significant declines in recent years. This is mainly due to the scarcity of available space and rising land prices in these regions. As a result, demand is increasingly shifting to peripheral locations where more space is available at more favorable conditions.

Rental trends reflect the shortage of available space. In prime locations, rents are rising steadily by up to 3.5 percent annually. Top rents in major cities have already reached €9.20 per square meter. These price increases are driven not only by the scarcity of available space but also by rising construction costs and stricter sustainability and energy efficiency requirements.

Another important trend is the high proportion of new construction in the logistics real estate market. Approximately two-thirds of total space turnover is attributable to new buildings. This demonstrates that existing facilities often no longer meet modern requirements and that companies are willing to invest in new, technologically advanced logistics properties.

The demand structure has also changed. While logistics service providers used to dominate the market, industrial companies are now the most important user group, accounting for over 40 percent. This reflects the trend toward internalizing logistics functions and the importance of logistics for industrial restructuring processes.

What structural causes underlie the space shortage?

The shortage of logistics space in Germany is not only the result of rising demand, but also of structural problems on the supply side. These causes are deeply rooted in the political, legal, and planning framework and require long-term solutions.

A key problem is the restrictive land-use policies of local authorities. Logistics areas play a subordinate role in inner-city development plans, even though they are crucial for small and medium-sized enterprises. Urban planners and municipalities often prefer other uses such as residential or office space, as these are perceived as more attractive and less disruptive.

The German government aims to reduce land consumption to less than 30 hectares per day by 2030, and the EU is even striving for net-zero land consumption by 2050. These environmental policy goals increase the pressure on available commercial and industrial land and significantly complicate the designation of new commercial and industrial zones.

Lengthy approval processes exacerbate the problem. Developing new logistics space involves complex planning and permitting processes that can drag on for several years. These delays mean that supply cannot keep pace with growing demand.

The scarcity of urban land further restricts supply, particularly in prime logistics centers. In metropolitan areas, logistics facilities compete with other uses for limited land, often losing out. This leads to the displacement of logistics to peripheral locations, resulting in longer transport routes and higher costs.

Another structural factor is the increased risk aversion of banks when financing speculative logistics projects. The share of speculatively built logistics properties has fallen to just 13 percent of the total development volume, compared to an average of 32 percent between 2019 and 2023. This means that new space is now primarily developed only with secured pre-leasing, which limits market flexibility.

The fragmentation of responsibilities between different administrative levels makes coordinated spatial planning difficult. While the federal government sets the overarching goals, concrete implementation lies with the states and municipalities, which often have different priorities. This lack of coordination leads to suboptimal results and delays necessary developments.

Why does the logistics industry continue to experience strong growth despite economic stagnation?

The continued dynamism of the logistics sector, despite overall economic stagnation, can be explained by several structural trends and changes that operate independently of the general economic situation. These developments highlight the central role of logistics in the modern economy and its function as an enabler for other industries.

E-commerce remains a key growth driver, even if the pace has slowed somewhat. Consumer expectations for fast delivery times and flexible shipping options necessitate decentralized logistics structures and modern distribution centers. A forecast predicts an expansion of e-commerce-related logistics space by up to 500,000 square meters in Germany alone by 2028.

Restructuring processes in industry are also driving demand for logistics space. The automotive industry, in particular, requires new warehousing and distribution structures for batteries, spare parts, and altered supply chains in the wake of electromobility. These industrial transformation processes are largely independent of short-term economic fluctuations and continue even in economically challenging times.

The increasing complexity of global supply chains and the need for risk diversification are driving additional warehousing demands. Companies are building buffer stocks to protect themselves against supply disruptions and implementing nearshoring strategies that require local warehousing. These defensive strategies are increasing the demand for logistics space, even when the overall economy is stagnant.

Sustainability requirements are driving the modernization of existing logistics structures. Over 65 percent of institutional investors prefer ESG-compliant real estate projects. This is leading to a demand for energy-efficient, certified logistics buildings and the replacement of outdated structures with modern, sustainable alternatives.

The digitalization of logistics processes requires new infrastructures and building concepts. Automated warehouse systems, robotics, and artificial intelligence necessitate specially designed spaces with appropriate technical equipment. These technological requirements are rendering many existing logistics properties obsolete and creating a demand for modern, technology-compatible spaces.

Demographic change and the shortage of skilled workers are intensifying the trend toward automation in logistics. Companies are investing in technology-intensive solutions to reduce their dependence on human labor. These automation investments continue even during periods of economic downturn, as they create long-term competitive advantages.

Container high-bay warehouses and container terminals: The logistical interplay – Expert advice and solutions - Creative image: Xpert.Digital

This innovative technology promises to fundamentally change container logistics. Instead of stacking containers horizontally as before, they are stored vertically in multi-tiered steel rack structures. This not only enables a drastic increase in storage capacity within the same space but also revolutionizes the entire processes in the container terminal.

More about it here:

• Container high-bay warehouses and container terminals: The logistical interaction – expert advice and solutions

What impact does the shortage of available land have on German competitiveness?

The lack of suitable logistics space jeopardizes Germany's competitiveness on several levels and could lead to a weakening of its economic position in the long term. The effects range from direct cost increases to strategic disadvantages in international competition.

Germany has already lost its position as the world logistics champion and has fallen from first to third place in the World Bank's Logistics Performance Index. This decline is partly due to infrastructure deficits and capacity bottlenecks, including a lack of

Logistics space is included. German logistics is no longer competitive in many areas, which is symptomatically reflected in the former locational advantages.

Space scarcity is leading to significant cost increases, which are impacting the competitiveness of German companies. Rising rents and land costs in logistics centers are passed on to customers, ultimately making German products more expensive on international markets. Companies must either accept higher costs or resort to suboptimal locations, resulting in longer transport routes and less efficient processes.

The lack of available suitable land is hindering investment and the establishment of international companies. Foreign investors who want to use Germany as a logistics hub for Europe cannot find the necessary land or have to pay prohibitively high prices. This weakens Germany's position as a gateway to Europe and favors other locations in the region.

The shortage of available land forces companies to make suboptimal location decisions. Instead of choosing the logistically best location, they have to opt for the available one, which negatively impacts the efficiency of the entire supply chain. This leads to longer delivery times, higher transport costs, and poorer customer service, weakening the competitive position of German companies.

Limited flexibility in site selection hinders the adaptability of the German economy to changing market conditions. In a dynamic global environment, the ability to quickly adapt logistics structures is a crucial competitive factor. If companies cannot operate flexibly due to a lack of space, they lose responsiveness and market adaptability.

The lack of modern, technology-compatible logistics space is delaying the digitalization and automation of German logistics. While other countries are investing in state-of-the-art, automated logistics centers, German companies often rely on outdated infrastructure. This leads to productivity disadvantages and higher operating costs, which impair international competitiveness.

How will the demand for logistics space develop by 2028?

Forecasts for the development of logistics space demand until 2028 present a differentiated picture, characterized by short-term slowdowns and long-term growth. This development reflects the complex interplay between cyclical factors and structural trends.

For 2024, a temporary dip in demand is initially expected, representing a reaction to current economic uncertainties and increasing cost pressures on tenants. However, this decline is primarily cyclical and should not obscure the longer-term growth trends.

Forecasts for development up to 2028 paint a significantly more positive picture. Studies anticipate an increase in take-up to approximately 7.1 million square meters in 2028, representing growth of 27 percent compared to 2023. This growth is driven by various megatrends, including digitalization, flexibilization, and demographic change.

New construction volume could increase to over 4.5 million square meters per year by 2028, provided that the necessary land is made available by municipalities. This forecast shows that the growth potential depends heavily on the availability of suitable land and is influenced by political decisions at the municipal level.

Different sectors will contribute differently to demand development. Despite current signs of a slowdown, e-commerce will remain an important growth driver, particularly due to realignments by established players and initial restructuring towards decentralized logistics. The retail and wholesale sectors are also showing continued momentum in restructuring their logistics networks.

Wholesale trade is of particular importance and, according to expert surveys, should be given greater attention by developers and landlords. This sector has received less attention to date, but shows considerable growth potential in the demand for modern logistics space.

The automotive industry will develop additional space requirements due to the transformation to electromobility. New supply chains for batteries, altered spare parts logistics, and modified production processes necessitate adapted logistics structures. This industrial transformation is largely independent of economic fluctuations and will structurally support demand.

Demand for sustainable logistics space will grow disproportionately. By 2030, the supply gap for sustainable logistics space in Germany is expected to reach 42 percent. Across Europe, demand will exceed supply by 21.2 million square meters, creating significant investment opportunities for developers and investors.

What solutions are there for the space shortage?

Addressing the shortage of space in the German logistics sector requires a multifaceted approach that includes both short-term measures to increase efficiency and long-term structural reforms. Various stakeholders are already working on innovative solutions that have the potential to ease the situation.

Multi-story logistics properties offer a promising solution to the shortage of space, particularly in urban areas. In Asian metropolises, logistics properties with four to six stories are already standard, with external ramps allowing trucks to easily reach the upper levels. In Germany, however, the legal framework must first be established to enable the realization of this type of logistics property.

The development of brownfield sites is becoming increasingly important. In many regions heavily affected by structural change, inner-city areas are available unused. These areas can be developed for modern logistics applications through redevelopment and conversion, enabling the efficient use of already sealed surfaces and reducing pressure on green spaces.

The revitalization of existing buildings represents another important pillar in solving the land shortage problem. With vacancy rates of less than two percent in many metropolitan areas, demand forecasts are needed at the federal, state, and municipal levels, which must be closely coordinated with regional spatial planning programs. Existing buildings can be adapted to current requirements through modernization and technical upgrades.

Innovative mixed-use concepts could help increase the acceptance of logistics areas in urban regions. Projects that combine living, working, retail, and logistics demonstrate ways in which logistics functions can be better integrated into urban development. However, these approaches require a change of mindset among urban planners and project developers.

Digitalization and automation can help increase the efficiency of existing logistics spaces. By using artificial intelligence, robotics, and optimized warehouse management systems, space productivity can be increased. This reduces the absolute space requirement and enables more intensive use of existing capacities.

Cooperation between companies can contribute to a more efficient use of logistics space. Shared logistics concepts, in which several companies use joint warehouses and distribution centers, reduce the overall space requirement and improve capacity utilization. However, these approaches require new forms of cooperation and trust between competitors.

Policymakers must adapt the legal framework to enable innovative solutions. This includes changes to building regulations to allow for multi-story logistics properties, simplified permitting processes for brownfield developments, and more flexible zoning regulations for mixed-use areas. Without these regulatory adjustments, many promising solutions will remain untapped.

Container terminal systems for road, rail, and sea in the dual-use logistics concept of heavy-duty logistics - Creative image: Xpert.Digital

In a world characterized by geopolitical upheavals, fragile supply chains, and a new awareness of the vulnerability of critical infrastructure, the concept of national security is undergoing a fundamental reassessment. A state's ability to ensure its economic prosperity, the supply of its population, and its military capability increasingly depends on the resilience of its logistics networks. In this context, the term "dual-use" is evolving from a niche category of export control to a overarching strategic doctrine. This shift is not merely a technical adaptation, but a necessary response to the "turning point" that requires the profound integration of civilian and military capabilities.

Suitable for:

• Container terminal systems for road, rail and sea in the dual-use logistics concept of heavy-duty logistics

What international examples demonstrate successful coping strategies?

Other countries have already developed innovative approaches to addressing land scarcity in logistics, which can serve as models for Germany. These international examples demonstrate how, through creative solutions and political will, efficient logistics structures can be created even with limited land resources.

Singapore, which has overtaken Germany as the world logistics champion, impressively demonstrates how a highly efficient logistics infrastructure can be built even in extremely limited spaces. The city-state model relies on vertical logistics solutions, highly automated systems, and the optimal use of every available square meter. Particularly noteworthy is the integration of various modes of transport and the seamless networking of sea, air, and land freight.

Hong Kong is home to the world's tallest logistics building, boasting 200,000 square meters of floor space spread across 24 floors. Each floor is individually accessible via a spiral ramp, enabling efficient distribution of goods without the need for complex elevator systems. This example demonstrates how innovative architecture and engineering solutions can create large storage capacities even with a minimal footprint.

Japanese cities like Tokyo have developed multi-story logistics centers with integrated ramps that allow trucks to drive directly to different levels. This solution combines the advantages of vertical space utilization with the practical handling of goods. Particularly impressive is the integration of these logistics centers into the urban fabric without disrupting the surrounding neighborhood.

The Netherlands has successfully developed logistics parks near ports that function as multimodal hubs. The Port of Rotterdam serves as a model for the efficient integration of different modes of transport and the creation of synergies between various logistics functions. This concentration enables optimal utilization of infrastructure and reduces the land required per ton handled.

Sweden has developed innovative concepts for integrating logistics into residential areas. Underground logistics centers in Stockholm demonstrate how space for logistics functions can be created even in densely populated areas without negatively impacting the quality of life for residents. While these solutions are more expensive to build, they offer significant long-term advantages in terms of land use.

France has successfully implemented mixed-use concepts that combine logistics, offices, and even apartments within a single building complex. These projects in Paris demonstrate how innovative architecture and thoughtful planning can harmoniously integrate different functions. The careful separation of various traffic flows and usage times is particularly important in this process.

What are the long-term consequences without strategic countermeasures?

Without a strategic shift in land-use policy and corresponding countermeasures, the German economy faces significant long-term damage that could permanently weaken the country's competitiveness. The consequences would affect various sectors of the economy and have cumulative effects.

The ongoing deindustrialization of Germany would be accelerated by the shortage of logistics space. Industrial companies that cannot find suitable logistics facilities or face prohibitively high costs will increasingly relocate their production abroad. A survey by the Federation of German Industries (BDI) already shows that 16 percent of the companies surveyed are actively relocating at least part of their production abroad, while 30 percent are considering this step in the near future.

The loss of its role as a European logistics hub would cost Germany significant added value. International companies that have supplied Europe from Germany will relocate their distribution centers to other countries where sufficient space is available at reasonable prices. This would not only result in direct losses of jobs in logistics, but would also affect related services and industrial suppliers.

Rising logistics costs would increase the prices of German products on international markets and worsen their competitiveness. German companies would either have to accept suboptimal locations, leading to inefficient supply chains, or pay high premiums for the few available prime locations. Both alternatives would worsen the cost structure and impair export capacity.

The innovative capacity of the German logistics sector would suffer, as new technologies and business models require adequate testing environments and scaling capabilities. Without sufficient space for pilot projects and the testing of automated systems, Germany would fall behind in international developments. In the long term, this would also jeopardize its technological leadership in related areas such as Industry 4.0 and autonomous systems.

Regional disparities would intensify as logistics functions are increasingly pushed to peripheral areas, while economic centers lose their logistical base. This would weaken metropolitan areas as economic hubs and simultaneously increase traffic congestion due to longer transport routes. The associated environmental impacts would run counter to the German government's climate goals.

The labor market would be significantly affected, as the logistics sector is one of the most important employers in Germany. The loss of logistics jobs would not only have direct employment effects but also indirect repercussions for related sectors such as transportation, warehousing technology, and IT services. Those most affected would be lower-skilled workers, for whom logistics often represents an important employment option.

Germany's attractiveness to foreign investment would diminish, as logistics connections are a crucial location factor for many industrial companies. Investors would increasingly prefer other European locations that offer better logistical conditions. This would set off a vicious cycle, as less investment would also mean less innovation and modernization of existing infrastructure.

What strategic shift is required?

The analysis of the current situation makes it clear that Germany is facing a critical turning point. The paradoxical state of a stagnant economy coupled with a shortage of logistics space necessitates a fundamental reassessment of current policies and a strategic shift that goes beyond short-term measures.

The structural problems of the German economy are deeply rooted and include high energy costs, demographic change, increasing international competition, and outdated infrastructure. In this context, a functioning logistics system is not only an important component but a crucial success factor for the competitiveness of the entire business location.

Expert findings show that the shortage of available space is not just a temporary problem, but a long-term threat to Germany's competitiveness. The warning of a massive shortage of logistics space is based on sound analysis and should be seen as a wake-up call for policymakers and businesses.

Successfully addressing these challenges requires a coordinated approach that involves various levels and stakeholders. The federal government must establish the overarching framework, the states must adapt their spatial planning accordingly, and municipalities must rethink their specific land designations. Without this coordinated approach, isolated measures will not suffice.

International examples show that innovative solutions are possible even with limited land resources. Germany can learn from the experiences of other countries while simultaneously developing its own solutions adapted to German conditions. In particular, the development of multi-story logistics properties and the better integration of logistics into urban areas offer considerable potential.

The digitalization and automation of logistics offer additional opportunities for increasing efficiency and should be promoted. Investments in modern technologies can help increase the productivity of existing spaces and reduce the overall space requirement. At the same time, such investments would strengthen the competitiveness of the German logistics sector.

Sustainability must be seen as an opportunity, not an obstacle. The high demand for sustainable logistics space demonstrates that environmentally friendly solutions can also be economically successful. Developing energy-efficient, CO2-neutral logistics properties can give Germany a competitive advantage and simultaneously contribute to achieving climate goals.

The time for a strategic shift has come. The German economy can no longer afford to wait while other countries modernize and expand their logistics infrastructure. Only through decisive action at all levels can Germany maintain and strengthen its position as a major economic hub and logistics center in Europe. The logistics sector is ready for this challenge, but it needs the appropriate political and social framework to reach its full potential.

Markus Becker

I would be happy to serve as your personal advisor.

Head of Business Development

LinkedIn

Konrad Wolfenstein

I would be happy to serve as your personal advisor.

contact me under Wolfenstein ∂ Xpert.digital

call me under +49 89 674 804 (Munich)

LinkedIn