London Heathrow leads ranking of world's most expensive industrial locations

2 Mar, 2006, London

London's Heathrow area is the most expensive location in the world for industrial & warehouse space, with occupancy costs for one square metre of space at Euro247 a year, according to this year's edition of Industrial Space Across the World, published by global real estate consultancy Cushman & Wakefield.

In second place comes Tokyo, with occupancy costs at Euro156, around two-thirds of those in London. Whereas rents (the main part of occupancy costs), have been stable in Heathrow, those in Tokyo increased 9 per cent last year, narrowing the gap between the two cities by around 5 per cent. In third place comes Dublin followed by Moscow.

Industrial Space Across the World monitors the cost of occupying industrial & warehouse space in 122 key locations in 44 countries around the world. On a global level, rents increased by an average 2.6 per cent in 2005 compared with 1.4 per cent in 2004. Only 16 per cent of locations showed a decline in rents, with the remainder either rising or stable.

Elaine Rossall, Head of Business Space Research & Consultancy of Cushman & Wakefield in Europe: comments: "This is the third year of global rental growth, with increased demand coming from cross-border logistics operators expanding into new markets and the continuing movement of industrial activities from the developed to emerging markets."

One of the biggest risers in the ranking of the world's top occupancy costs for industrial and warehouse space is Hong Kong, leaping nine places to 11th position. With rent the key component of occupancy costs, Hong Kong also experienced the world's fastest growth in industrial rents in local currency terms last year, at 25 per cent (see Page 3).

"Hong Kong continues to benefit from its strategic position as the gateway between mainland China and the rest of the world, and the future continues to look bright for Hong Kong," says James Fisher, Managing Director of Cushman & Wakefield's Hong Kong office. "Later this year, all trade tariffs between China and Hong Kong, a Special Administrative Region of China, will be scrapped as part of their Closer Economic Partnership Arrangement."

Another big climber in the ranking, going up nine places, is the Canadian city of Calgary, Alberta, located close to some of the world's largest energy reserves. "Rising oil and gas prices are behind a city wide boom and have led to greater demand for industrial space, with the vacancy rate for prime space falling to 3.5 per cent at the end of last year," says Chris Anderson, Vice President & General Manager, Cushman & Wakefield LePage's Calgary office.

On a regional basis, Africa & the Middle East, pushed ahead by strong growth in the South African locations, had the highest rise in rents last year, at an average 11 per cent, followed by Asia Pacific with 7.2 per cent, 4.2 per cent for US & Canada, 1.2 per cent for South America & Mexico and for Western Europe, and a fall of 0.4 per cent for Central & Eastern Europe, where increases in the supply of space have helped ease what previously was a very tight market.

Hong Kong leads location ranking of rental rises

The top ten locations in terms of increase in rents last year include three South African locations, buoyed by a shortage of high-quality large units and healthy consumer spending.

Looking ahead, Elaine says: "The globalisation of the world's economies, and forecast global economic growth of 3.3 per cent this year, will continue to bring buoyancy to industrial and warehouse markets around the world. In the dynamic market of China, growth will come from the expansion of the logistics sector as consumer spending rises as well as from the shift of manufacturing from the developed to emerging economies.

"In developed economies, the logistics sector will continue to lead demand, with availability of labour becoming an increasingly important factor, together with the demand for high-quality premises near good transport infrastructure."

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