Warehouse costs increased on average by 8.4% globally and by 6.7% in Europe, with Prague being an outlier, recording an increase of 35.8% in a year due to exceptionally low vacancy. The nationwide vacancy rate fell back to 1.4% in Q2 2022 and this is the lowest level in the market´s history, says Savills in its latest report.
According to Savills, the average cost of warehouse property increased 8.4% between June 2021 and June 2022 across 52 global markets. It was due to the demand surging 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 €376 per sqm (rent, service charges and taxes), followed by Hong Kong at €279 and Tokyo at €236.
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, have kept vacancy rates for prime space below 3%. Elsewhere strong demand and lack of Grade A stock in Dubai have led to warehouse costs rising there by 7.7% in the space of a year to €204 per sqm, 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%. In Europe, by comparison, they rose on average 6.7%, although warehousing costs in Prague have been an outlier, rising 35.8% 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% in Q1 2022 back to 1.4% 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% globally in the past year, and electricity and diesel costs 39.4%
Chris LaRue, Head of the Industrial Agency at 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% across the 52 global markets surveyed. Prague’s warehouse rents have risen 35.8% due to nearly zero vacancies and unrelenting demand. Only the port city of Los Angeles has seen a higher increase.”
