The average cost of warehouse property increased 8.4 percent between June 2021 and June 2022 across 52 global markets, says Savills, as demand surged for industrial and logistics space in the wake of the pandemic. 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 percent. Elsewhere strong demand and lack of Grade A stock in Dubai have led to warehouse costs rising there by 7.7 percent in the space of a year to $19 per sq ft, putting it in the 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 percent.
In Europe, by comparison, they rose on average 6.7 percent, although warehousing costs in Prague have been an outlier, rising 35.8 percent in a year due to exceptionally low vacancy rates and its role as a ‘nearshoring’ hub for many European companies. Demand for industrial space in the Czech Republic remains extremely competitive as vacancy levels continue to be at an all-time low. The nationwide vacancy rate fell from 1.8 percent in Q1 2022 back to 1.4 percent in Q2 2022, being the lowest level in the market’s history.
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 percent globally in the past year, and electricity and diesel costs 39.4 percent.
Chris LaRue, head of the industrial agency, Savills CZ&SK, comments: “In some circles, Prague has been referred to as the Paris of the East because of its beautiful architecture. Prague is now being compared to Paris for one more reason. Its warehouse rent costs have reached nearly the same level as those in Paris over the last year. On average, warehouse rents have risen globally by 8.4 percent across the 52 global markets surveyed. Prague’s warehouse rents have risen 35.8 percent due to nearly zero vacancies and unrelenting demand. Only the port city of Los Angeles has seen a higher increase.”