London retains its title as the world’s most expensive industrial location

12 Mar, 2008, Paris

- Dublin jumps two places in the global ranking of occupancy costs to second place, followed by Tokyo in third place.
- Mumbai is the biggest riser in the ranking, up 11 places to 26^th. The Indian city also experienced the biggest increase in rents, the main component of occupancy costs, of all 138 locations monitored.

The area around London’s Heathrow airport retains its position as the world’s most expensive industrial location in this year’s edition of Industrial Space Across the World, a report by global real estate consultancy Cushman & Wakefield.

One square metre of prime industrial space at London Heathrow costs €211 per square metre or US$28.9 per square foot per year to occupy. London is followed by the Irish capital Dublinin second place, up two places, and Tokyo in third.

However, rents (the most important component of occupancy costs) remained stable last year in local currency terms in London Heathrow. This compares with 94% for Mumbai in India and 60% for Istanbul.

Industrial Space Across the World 2008 looks at prime industrial space for manufacturing and logistics/warehousing in 138 of the world’s top industrial locations. The main global ranking is compiled by taking the most expensive location in Euro/US$ terms in each of the 52 countries monitored.

In this year’s survey, 89% of locations showed rising or stable occupancy costs for industrial space in 2007, with only 11% showing a fall. Globally rents increased by an average of just over 6% in 2007, with South America showing the strongest growth on a regional basis, with 25%.

Regarding London Heathrow’s No. 1 position, Kevin Storey, Head of Industrial Space for Cushman & Wakefield in the UK, comments: “The effect of the opening of Heathrow airport’s new Terminal 5 in March 2008 has been relatively muted so far, although it does add to the continuing pressure on supply in the airport area. There is an availability of smaller, second-hand units in the general area, but large sites or units are few. The shortage of land has already seen the construction of two-storey buildings at X2 in Hatton Cross.”

Despite European cites accounting for seven out of the top ten locations in the global ranking, regional growth was slowest in Europe, of all the global regions, at just 2.5% last year. Steven Watt, Head of Pan-European Logistics & Industrial for Cushman & Wakefield, says: “We are seeing a two-speed Europe: Western Europe had an average rental growth of only 1.3% last year, while Central and Eastern Europe motored ahead at 7%. The market in CEE is being fuelled by manufacturers and distributors attracted by the lower cost base, and from where they can serve both the Western markets and the burgeoning consumer demand in CEE itself. The core locations in CEE have traditionally been in Poland and the Czech Republic, but now we are also seeing rapidly increasing interest in Romania. Future hotspots are likely to be Turkey and Ukraine.”

The fastest riser in the global ranking is Mumbai, which goes up 11 places to 26^th.Sanjay Dutt, Joint Managing Director of Cushman & Wakefield India, says: “High levels of owner occupancy in Mumbai have led to a shortage of product at a time when demand is being stimulated by India’s strong economic growth. This in turn has increased rents. With a shortage of space in the city itself, many occupiers are locating in industrial parks in the outskirts, in particular as the infrastructure improves and with the introduction of state incentives. In Chennai, locations such as Sriperumbadure, and in NCR, Manesar and Greater Noida, have seen a similar shift towards developments in peripheral locations.”

The world’s most expensive industrial locations

Mumbai also comes top out of all 138 locations when it comes to rental rises in local currency, with rents rising 94% last year.

Istanbul comes second, with rents rising 60% last year in local currency. Rahsan Cebe, Managing Director of Cushman & Wakefield’s Alliance Partner in Turkey, P&D Real Estate Consultants, says: “Demand is being driven by the logistics and the light industrial occupiers, with modern property in short supply despite a sizable development pipeline. Traditionally, industrial areas in Istanbul have been concentrated on the European side, in areas such as Ayazağa, but with the shortage of supply we are now seeing significant growth in several districts on the Asian side, in particular Tuzla and Gebze.”

Looking forward, Elaine Rossall, Head of Business Space Research & Consultancy for Cushman & Wakefield in Europe, says: “The world’s emerging industrial markets will continue to drive global rental growth this year. In the more mature markets, however, growth is likely to be moderated as concerns with the credit crunch filter through.”

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