Where will you find the world’s cheapest logistics space?

Heathrow Airport (UK) is the most expensive place in the world if you want to rent a warehouse. That is the conclusion of a report from the commercial estate agents DTZ. According to the ‘Global Occupancy Costs Logistics 2013’ report, renting and running a logistics facility around London’s biggest airport will cost US$313 per square metre per annum, including both the rent and other costs such as taxes and property service costs. This is all the more remarkable as Heathrow is a much smaller airport for handling cargo than its German rival Frankfurt which has less than half the costs at US$110 per square metre.

South East England is generally a very expensive place for logistics property, with Oslo the only comparable location in Europe. Only cities such as Hong Kong and Singapore, amongst major logistics locations, are more costly, with smaller locations in Russia, Switzerland or Norway rivalling it.

It is hardly surprising that, at around double the global average, Hong Kong and Singapore are so expensive bearing in-mind their geography; combined with the role that logistics plays in their wider economies. However, Asia-Pacific also has some of the lowest cost sites for logistics property in Wuhan, Chengdu and Shanghai, cities where a warehouse will cost approximately one quarter of the more than US$200-250 per square metre per annum in Hong Kong and Singapore.

What is remarkable, however, is that Atlanta is almost as inexpensive as the cheapest Chinese city. Indeed, the US has generally cheap facilities as compared with much of the rest of the world, although certain areas such as Houston are seeing more elevated costs due to a buoyant local energy market.

DTZ view the prospects for warehousing costs as benign, with the average gross increase of 1.6% being less than the average rate of inflation in the wider economy. The reason for this is the buoyant supply of new logistics property space, although there are exceptions. For example, Dublin (Ireland) has a shortage of quality developments and this is likely to increase costs as a recovering economy demands new capacity. In contrast, Hong Kong is likely to experience a continuing flight of customers out of the city to cheaper sites on mainland China resulting in falling costs.