DTZ Research: Logistics Occupiers In Europe Continue To Benefit From Low Growth In Costs
– London Heathrow remains the most expensive market globally, followed by Hong Kong, Zurich, Singapore and Oslo
– The global top five least expensive markets are dominated by the Chinese Tier II cities of Wuhan, Shenyang and Chengdu, with Atlanta and Marseille completing the list
– Despite above inflation growth in 2012, DTZ’s five-year outlook for global logistics occupancy costs is muted at an average annual growth of 1.6%
– Occupiers in Europe will continue to benefit from subdued cost growth. The five-year outlook is for an annual average increase of 1.4% in Europe.
UK: DTZ today released its Global Occupancy Costs Logistics 2013 report, presenting the current costs of occupying prime logistics space across 64 markets worldwide. The report reveals that Asia Pacific is home to some of world’s least and most expensive logistics markets. China contains the world’s three least expensive logistics markets of Wuhan, Shenyang and Chengdu. In contrast, other markets in Asia Pacific operate as large logistics hubs and naturally offer less cost saving opportunities for occupiers. These include Hong Kong and Singapore featuring in the top five most expensive locations. London Heathrow remains the least affordable market globally. In Europe, secondary cities including Marseille and Antwerp offer more affordable logistics space.
Karine Woodford, Head of Occupier Research and co-author of the report, comments: “Looking forward, global logistics occupancy costs are projected to increase by a modest rate of 1.6% to the end of 2017, below the global inflation rate. This is driven by increased future space supply across markets, which will limit potential rental growth. There are, as expected, significant differences between markets. Whilst occupiers in Hong Kong and Milan are expected to benefit from falling costs, we anticipate rising costs in Dublin at 5.4% and Melbourne at 3.4%, supported by consistent tenant demand.”
The report reveals that occupiers in Europe will continue to benefit from subdued cost growth. The five-year outlook is for an annual average increase of 1.4% in Europe. However, there are marked differences between individual markets. Dublin’s growth trajectory will continue beyond 2014. In contrast, Milan is expected to see the biggest decline in costs in the short and medium term.
Magali Marton, Head of CEMEA Research comments: “During 2012, the lack of quality supply in several European markets prevented downward pressure on prime rents. However, total cost savings were realised in the more economically challenged southern European markets with Rome witnessing the biggest fall (7%) on the back of rental decreases. In contrast, St Petersburg, Tallinn and Moscow recorded the strongest growth, at 8.2%, 7.5% and 4.6% respectively. “
Dublin, whilst in global terms a small market, is nonetheless anticipated to be the highest growth market in Europe between now and 2017, reaching costs of 100 EUR/sq m pa compared to the current 77 EUR/sq m pa. This growth will be supported by a steady recovery in the economy and continuous strong demand for limited high-quality space. The Baltic markets Riga and Vilnius will also see growth (3.1% pa). Meanwhile, there will be cost saving opportunities for occupiers in Milan, as poor economic prospects and weak demand will have dampening effect on rents.
Rob Hall, Head of CEMEA Logistics, comments: “In respect of Europe, the UK continues to be one of the most expensive locations for occupiers, with six of the markets covered above the European average. Four Nordic markets are also in the top ten most expensive locations.
“Marseille, Antwerp, Brussels, Lyon and Budapest will continue to offer the lowest occupancy costs in Europe to 2017. However, as the projected cost growth rate will be subdued in Antwerp going forward, we expect it to replace Marseille as the most affordable market.”