Global Logistics Costs To Grow at Moderate Pace

LONDON-Demand for logistics space worldwide will gently push cost by 1.6% annually over the next five years, according to a recent industry research.

DTZ Research, London, recently released its third Global Occupancy Costs - Logistics report, provides future outlooks for 54 markets across Asia Pacific, Europe and the US. The firm says that cost increases should stay below the overall inflation rate, in contrast to higher escalation experienced in 2012.

Globally, the five least-expensive markets are dominated by the Chinese tier II cities of Wuhan, Shenyang and Chengdu, with Atlanta and Marseille rounding out the list. Costs in all these markets are below $70 per square meter annually. Meanwhile, London Heathrow remains the most expensive market globally - at $313 per square meter, followed by Hong Kong, Zurich, Singapore and Oslo.

“Although persistent economic challenges and subdued industrial production continued to weigh down on occupier activity, there were signs of revival and increased tenant demand in numerous markets worldwide,” The report states. “But, one of the biggest challenges for tenants in all three regions (Asia-Pacific, Europe, and Norther America) was the limited choice of quality logistics space. Overall, the strongest demand was observed in Asia Pacific, reflected by the 6% annual growth in costs (in USD terms). This was nearly double the average global growth in costs of 3.0%. North America offered occupiers the greatest cost saving opportunities in USD terms, with costs growing by a modest rate of 1.5%. In Europe, costs grew by nearly 3% in USD terms. It should be noted that the European performance was weaker in local currencies as costs grew by an average of 0.5%.”

Going 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. Again, there are significant differences between markets. DTZ predicts lower costs in Hong Kong and Milan through 2017, but rising costs in Dublin (5.4%) and Melbourne (3.4%), related to projected availability.