European logistics occupancy costs are expected to increase 1.6% on average per year until 2014, in line with the European economic recovery, according to a new report from DTZ Research. The growth in occupancy costs will be weak until 2012, presenting significant pockets of opportunity for occupiers seeking value, before a period of steady growth up to 2014.
The first ever DTZ European Occupancy Costs Survey Logistics 2010, also reveals a considerable divergence in occupancy costs across the region, ranging from a low of 51.2 per m² per annum in Marseille to 215 per m² per annum at London Heathrow. The European average stood at 86.3 per m²per annum at the end of September 2010. Occupiers face the greatest costs in London Heathrow, Oslo, South East England and Dublin. In contrast, logistics companies benefit from lower costs in France, Belgium and Central Eastern Europe markets predominantly due to lower rental rates.
According to the report, during the next three years occupancy costs are likely to experience the largest increase in markets affected most during the economic crisis, such as Barcelona and Madrid. However, occupancy costs in these markets at the end of the forecast period (2014) will still be substantially below their pre-crisis levels. In contrast, occupiers will continue to benefit from low costs in Bucharest projected to see the lowest growth in occupancy costs until 2014.
Rob Hall, Head of DTZ CEMEA Logistics, comments: "Our research highlights the huge disparity in logistics occupancy costs across Europe when taking into consideration rental costs, property taxation and service charge differentials. Occupancy costs in the Nordic cities of Oslo, Helsinki and Stockholm are above average because of high construction costs in the cold climate and limited supply of Grade A buildings. This is in contrast to France and Belgium and the cities of Bucharest, Budapest and Prague. Our report also compares other significant business costs such as salaries and the price of diesel across the region. Our analysis reveals that some of the more expensive locations in terms of occupancy costs, offer relatively competitive labour costs a further consideration for logistics occupiers seeking to obtain maximum value from European locations."
The report shows that during the past 12 months, occupier activity in the logistics sector has improved with some demand returning, particularly for modern flexible distribution space. The rise in occupancy costs will, however, be gradual and occupiers will be able to take advantage of this period of weak growth to find good value opportunities. The expansion of trade and logistics in Central and Eastern Europe is likely to lead to increased occupier costs in Prague, whilst Hamburg is the fastest growing German hub.
Éva Tamás, Hungarian Property Adviser said "Our research shows that Budapest is one of the ten lowest cost occupational markets in Europe. It offers better value for money than the competing logistics locations of both Prague and Warsaw. The total annual occupational cost in Budapest stands at 57.6, which is a third cheaper than Warsaw, the most expensive city in the CEE region.
The Budapest logistics market has reached the bottom, however, in recent months we have seen an improvement in the economic environment which has had a beneficial effect on global logistics markets. As a result of this, we predict an increase in activity in the Budapest logistics market leading to an average annual increase of 1.98% until 2014. This increase is likely to be reinforced by the lack of completions of new buildings in the market and a steady rise in occupational demand."