Commercial People has learned that London has been ranked as the most expensive city in the world for logistics warehouse space.
As revealed by Cushman & Wakefield in their inaugural Global Logistics Outlook Report, London topped a list of 250 cities to become the most expensive city for logistics space.
The UK’s capital which saw warehouse space priced at US $24.90 per square foot (p-sqft) per year, beat the likes of Hong Kong ($19.93) and San Franciso ($18.25), which occupied second and third place.
Cushman & Wakefield’s Global Logistics Outlook Report ranked cities by their average rental price p-sqft and annual rental growth.
As shown in the image above, London performed far higher than Geneva, the next European city on the list.
Conversely, logistics space in India was noted as being the most affordable, with the country featuring three cities in the top 5 and a further five more cities (Chennai, Kolkata, Pune, Mumbai and Bengaluru) occupying the top 20 spaces.
The UK Leads the Way
UK cities such as Northampton and Bristol (both $10.37) also ranked more expensive than more globally recognised locales such as Barcelona ($9.64) and Beijing ($9.59)
Simon Lloyd (pictured right), Partner, Logistics & Industrial at Cushman & Wakefield, comments: “Northampton’s location on the M1 means that it has unrivalled accessibility to the majority of the UK in a day, and also provides an immediate and direct link to the important South East market.”
In addition to being characterised as the most expensive city, London also saw the strongest annual rental growth across Europe in 2020, up by 13% on the previous year, followed by Central Scotland at +8%, Northampton at +7%, Manchester at +4% and Bristol at +3%.
The level of growth can be considered impressive against a comparatively fragmented global backdrop, with less than half of the markets tracked recording growth in 2020.
Demand outstrips supply
Cushman & Wakefield’s report indicates that the strong rental growth in Europe and the UK can be pinned to significant supply constraints stemming from a combination of a lack of developable land and strict planning regimes.
Based on the global advisors’ year-end data, vacancy continues to trend downward in most of Europe’s key logistics hubs. The report shows vacancy rates of approximately 4% in the UK, pointing to a severe lack of stock.
Richard Evans, Head of Logistics & Industrial UK at Cushman & Wakefield, states: “Our data reflects the incredibly strong turnaround we witnessed last year. Post-COVID demand trended at approximately double our annualised average and has continued this year. With the speculative pipeline supply lagging, we expect to see continued rental growth throughout 2021 and the UK to remain one of the top performing markets in the world.”
Record take-up across Europe
Cushman & Wakefield report that while many markets experienced a lull in activity during the first half of 2020 due to strict lockdowns, a resurgence in activity during Q3 & Q4 resulted in a record European-wide total take-up. Take-up for Q3 & Q4 were 345 million sq ft during 2020, 14% higher than 2019 levels (301m sq ft).
Lisa Graham, Head of EMEA Industrial Research for Cushman & Wakefield, comments: “Europe’s logistics sector is grappling with supply constraints, stemming from a combination of a lack of developable land and strict planning regimes.
“In contrast to pre-Global Financial Crisis when speculative development represented roughly 80% of new construction, post-GFC has been characterised by predominantly built-to-suit development that has led to severe supply shortages in most of Europe’s core logistics markets. As speculative construction resumed post-lockdowns more product came to market, pent up demand was released and leasing activity accelerated.”