London is the world's most expensive industrial location

London’s Heathrow area has retained its position as the most expensive industrial location in the world, according to this year’s edition of Business Space Across the World, published by Cushman & Wakefield Healey & Baker, which operates the European division of global real estate consultant Cushman & Wakefield.

The costs of occupying one square metre of industrial space reached €236 in the Heathrow area, a favoured site for logistics and distribution companies given its place around Heathrow airport. In second place comes Dublin, which on the back of rental increases of 9 per cent, has leapfrogged Moscow, while Paris has moved into fourth place as rents increase by 7 per cent.

Business Space Across the World monitors 119 of the world’s key industrial locations, and then forms a ranking of the most expensive location in 43 countries. In local currency terms, rents globally went up by 1.5 per cent, with almost 80 per cent of locations seeing rents rise or at least stabilising over the year to December 2004.

Elaine Rossall, C&W/H&B’s Head of Business Space Research, says: “The industrial market continued on its path to recovery following the relatively weak performance seen in 2000 and 2001. Demand is being driven by logistics and distribution companies expanding to cater for robust consumer spending and the building of new distribution networks to serve emerging markets in Eastern Europe, Asia and Latin America.

“Rental increases in locations such as Amsterdam and Rotterdam, which have seen rises of 17 and 9 per cent respectively, are evidence of an increasing polarisation in the market. The emergence of top-quality space in prime locations has driven up rents for new developments, while at the other end of the market there is a big pool of poor quality space in secondary locations that does not fit the needs of the operators.”

The top ten in the ranking is dominated by European locations, apart from the San Francisco Peninsula in the US, the most expensive industrial location in the Americas, which this year has gone up five places to break into the top ten once again in 9th position after falling out in 2003. In local currency terms, rents increased 11 per cent but are still below their peak in 2000.

Since joining the European Union, the Central European countries of the Czech Republic, Hungary, Poland and Slovakia have emerged as a key region for the expansion of logistics and distribution companies as well as manufacturers.

“The growing demand for industrial space has resulted in the new supply growth of about 100 per cent year on year over the past three years,” says Ferdinand Hlobil, Head of Central European Industrial for C&W/H&B. “A fall in rents has been balanced by a fall in yields, which in turn has supported further development activity, but despite the growing supply of prime space the vacancy rate is still low.”

Another feature of Central Europe is the emergence of new regional distribution locations, such as Gyõr in Hungary, Brno in the Czech Republic, or Silesia and Poznan in Poland. However, Warsaw followed by Prague and Budapest remain the largest distribution hubs in the region, says Ferdinand Hlobil.

Average Rental Growth in local currency in the year to Dec 2004 by region (in %):
Americas: 3.0
US & Canada: 1.5
Latin America & Mexico: 14.7
Asia Pacific: 0.9
Europe Total: 0.2
Western Europe: 0.3
Central & Eastern Europe: -1.0
Africa & the Middle East: 9.2

Source: C&W/H&B

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