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

13 Mar, 2008, Amsterdam

• 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 26th. 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 Dublin in 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 26th. 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
* The ranking is compiled from the location with the most expensive occupancy cost in each country monitored. Rents, which form the largest part of occupancy costs, are calculated on a net internal basis.

Ranking 2008	Ranking 2007	Country	Location	Total occupancy costs€/sq m/year at Dec 07	Total occupancy costs US$/sq ft/ year at Dec 07
1	1	UK	London - Heathrow	211.23	28.91
2	4	Ireland	Dublin	159.50	21.81
3	3	Japan	Tokyo	142.63	19.51
4	8	Norway	Oslo	134.00	18.32
5	5	Australia	Sydney	132.60	18.14
6	2	Israel	Me'ouyan Soreq, Rishon Le-Zion	122.21	16.72
7	6	Sweden	Stockholm	120.55	16.5
8	9	Spain	Barcelona	114.00	15.59
9	7	Switzerland	Geneva	111.53	15.25
10	10	Finland	Helsinki	108.00	14.77
11	12	France	Paris	107.00	14.63
12	14	Singapore	Singapore	106.99	14.64
13	13	Netherlands	Schiphol Amsterdam Airport	97.00	13.26
14	11	Russia	Moscow	95.05	13.01
15	n/a	Venezuela	Caracas	94.76	12.97
16	20	Canada	Calgary	87.00	11.48
17	16	Germany	Frankfurt	86.40	11.81
18	15	Italy	Milan-Malpensa	85.50	11.69
19	n/a	Colombia	Bogota	85.30	11.67
20	17	Denmark	Copenhagen	84.46	11.55
21	24	US	San Francisco Peninsula	84.19	11.52
22	n/a	Croatia	Zagreb	84.00	11.49
23	18	Hong Kong	Hong Kong	82.41	11.27
24	19	Greece	Athens	81.79	11.18
25	n/a	Ukraine	Kyiv	81.48	11.15
26	37	India	Mumbai	79.52	10.88
27	26	New Zealand	Auckland	78.84	10.79
28	30	Latvia	Riga	78.00	10.67
29	21	Estonia	Tallinn	76.68	10.49
30	22	Czech Republic	Prague	74.40	10.17
31	40	Brazil	Sao Paulo	73.48	10.05
32	31	Bulgaria	Sofia	73.00	9.98
33	25	Austria	Vienna	70.80	9.68
34	29	Lithuania	Vilnius	69.51	8.52
35	28	Portugal	Lisbon	69.26	9.47
36	n/a	Taiwan	Taipei	68.97	9.44
37	33	Thailand	Chonburi-Rayong	66.62	9
38	27	Romania	Bucharest	66.51	9.12
39	43	Turkey	Istanbul	65.18	8.92
40	25	Belgium	Brussels	65.00	8.89
41	34	South Africa	Johannesburg	64.57	8.78
42	32	Hungary	Budapest	63.60	8.7
43	36	Poland	Warsaw	62.40	8.53
44	38	Argentina	Buenos Aires	58.66	8.03
45	n/a	Chile	Santiago	54.59	7.47
46	41	China	Beijing	53.45	7.31
47	39	Slovakia	Bratislava	51.50	7.04
48	42	Malaysia	Petaling Jaya	50.26	6.88
49	n/a	Vietnam	Ho Chi Minh City	47.66	6.52
50	44	Mexico	Monterrey	36.66	5.02
51	45	Indonesia	Greater Jakarta Area	31.61	4.33
52	n/a	Uruguay	Montevideo	14.67	2.01

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.”

Top ten locations for % rise in rents in 2007

Ranking	Country	City/Location	% increase in rents in local currency Jan 07-Dec 07
1	India	Mumbai	94.44
2	Turkey	Istanbul	60.00
3	Colombia	Bogota	54.20
4	Uruguay	Montevideo	38.46
5	India	New Delhi – IMT Manesar	30.00
6	Brazil	São Paulo	30.00
7	US	San Francisco Peninsula	29.15
8	Singapore	Singapore	26.15
9	Poland	Katowice	25.93
10	South Africa	Cape Town	23.53

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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