London most expensive location globally for warehousing

London most expensive location globally for warehousing

The average cost of warehouse property increased 8.4% in June 2022 from a year ago across 52 global markets, as demand surged for industrial and logistics space in the wake of the pandemic, according to Savills.

Savills says, London is the most expensive warehouse in the warehousing market in the world, with prime space costing $35 per sq ft (rent, service charges and taxes), followed by Hong Kong ($26) and Tokyo ($22).

In an update to its 2022 Impacts programme, Savills says that land constraints in these cities, where warehousing competes with other asset classes and supply is low, has kept vacancy rates for prime space below 3%.

Elsewhere strong demand and lack of Grade A stock in Dubai has led to warehouse costs rising there by 7.7% in the space of a year to $19 per sq ft, putting it in fourth position.

In the US, while warehouse costs are generally lower they have seen some of the biggest proportional increases in the past 12 months: in the seven major industrial markets space rose by an average of 20.1%.

In Europe, by comparison, they rose on average 6.7%, although warehousing costs in Prague have been an outlier, rising 35.8% in a year due to exceptionally low vacancy rates and its role as a ‘nearshoring’ hub for many European companies.

Savills says that rising warehouse costs are only one part of occupiers’ decision making-process when it comes to space: labour costs have also risen an average of 6% globally in the past year, and electricity and diesel costs 39.4%

Paul Tostevin, director in Savills World Research team, comments: “Changing consumer behaviour, the ecommerce boom and shifting supply chains, resulting in a lack of space and rental growth in many highly constrained markets, have driven the global warehousing market to new heights. Weakening consumer sentiment and higher energy and labour costs have not yet impacted demand or rents, and given the lack of grade A supply in many markets, costs are likely to remain high for the best located space. This will also be supported by further demand for the most highly rated sustainable buildings as retailers look to ‘green’ their supply chains.”