Global Warehousing Costs

Across the markets monitored, total costs­—comprising rents, service charges, and taxes—for prime warehousing space grew 10.1% in the 12 months to June 2023, says Savills.

The pace of property cost increases has slowed with H1 2023 seeing an increase of 4.4% in total costs, compared to 5.4% in the second half of 2022. The slower pace comes as vacancy rates rise from historic lows amid a weak economic backdrop and as more supply enters the market.

London continued to lead the global warehousing costs at $42 per sq. ft, which was supported by solid fundamentals and a surge in demand for modern and efficient warehouse units. Los Angeles came in second at $27, followed by Sydney, Hong Kong, Northern New Jersey in the US, and Tokyo.

UAE’s Growing Warehousing Sector Led to Team Expansion

A recent Savills study published in August of this year shows that the demand for industrial and logistical space in Dubai saw its strongest-ever performance on record. The Dubai Industrial Market in Minutes H1 2023 report additionally highlighted that the demand was mainly driven by companies relocating their operations to Dubai from other locations.

In response to the rising demand, Savills Middle East has expanded its industrial and logistics team, bringing in talent for both the leasing and investment functions. Michael Fenton joins the Savills Middle East business as a Director from Savills Australia. He has 30 years of experience in the industrial and logistics space and his core strengths include industrial sales and acquisitions, market analysis, business operations and strategies, and global investment and corporate advisory. Amir Bashota also joins the team as a senior broker and comes with valuable experience gained at prominent firms in New Zealand and UAE. Luke Tipp, already based in Savills Dubai, will continue to service industrial and logistics clients. He has over five years of transactional services experience across key commercial districts in Dubai and the wider GCC region, bringing valuable knowledge and established relationships with the landlords.

Michael Fenton, Director of Industrial & Logistics at Savills, commented by saying, “Dubai, and increasingly Abu Dhabi, have proved that the UAE is a dynamic economic hub in the Middle East characterised by growing demand, which is fuelled by a strong non-oil sector and the various economic partnerships signed by the UAE. This underlines the need for more supply of suitable facilities going forward.

“Dubai’s high ranking combined with Abu Dhabi's presence in the top fifteen reflects the nation's strength in this vital sector and demonstrates international competitiveness, attracting businesses and investors from around the world.

Outlook

Paul Tostevin, the director of world research at Savills, said of the findings: The research has additionally highlighted that despite the rate of property cost escalation slowing down, higher costs are here to stay. Global trends such as on- or near-shoring, increasing ecommerce growth, and demands from manufacturing occupiers continue to drive demand for prime locations and highly efficient warehousing spaces. Population growth and structural trends are likely to fuel demand for goods and services, which in turn will drive the need for warehouse facilities, even in the currently considered most economical locations, in the long term.

In addition to warehousing property costs, occupiers must consider labour costs, which rose by 7.4% in the 12 months leading up to June 2023 across the 52 markets examined, as well as the electricity and diesel costs associated with operating buildings and vehicle fleets. While diesel costs are falling, electricity costs continue to rise, emphasising the importance of prime space that is more energy efficient.