Two Australian cities feature in world’s most expensive logistics market

​London, 12 September 2013 – Brisbane and Perth feature as the eighth and tenth most expensive industrial real estate markets in the world as fierce competition for modern facilities from rapidly growing e-retailers and expanding third-party logistics operators (3PLs) drives demand, according to new research from global property advisor CBRE Group, Inc.

CBRE’s quarterly survey, which tracks the top 10 prime global logistics markets, reveals Tokyo is the most expensive market (US$20.02 per sq ft per annum), followed by London ($19.12 per sq ft per annum) and Singapore ($17.13 per sq ft per annum).

Rents in eight of the top 10 most expensive markets were stable during Q2 2013, with rental values growing in Tokyo and Hong Kong. Due to demand from e-retailers and expanding 3PLs, Tokyo’s rents expanded 2.2% during the quarter. Hong Kong grew by 2.6% for the quarter, due to exceptionally tight supply of available space. Third-ranked Singapore also faced a shortage of good-quality stock amid strong demand.

Prime rents in most European markets, including London, Paris, Stockholm, Moscow and Helsinki, held steady despite a challenging economic environment. However, demand for highly specified, well-situated warehouses remains robust. Occupiers looking to expand have limited options that met their specifications, prompting many to remain in their existing premises.

Prime Logistics Rent Ranking, Ranking by US$ per Sq Ft per Annum Basis

Dr. Raymond Torto, CBRE’s Global Chief Economist, commented:

“Retailers continue to serve as a significant source for global logistics demand in many markets, including London, Tokyo, Singapore, and Hong Kong. Meanwhile, the growth of e-commerce and international demand has benefited cities such as Tokyo and Brisbane.

“The shortage of high-quality, modern stock has also helped to support rents across many markets. While several cities have considerable supply pipelines, including Tokyo, Perth, Brisbane and Stockholm, there is little concern of oversupply due to strong demand. This was evidenced by the high level of pre-leasing commitments in Tokyo and Perth.”

Joshua Charles, CBRE’s Regional Director, Industrial & Logistics services, said Australia has one of the most advanced industrial development and tenant markets in the world.

“Having two of the world’s top ten highest rentals shows the buoyancy of Australia’s nation-wide tenant demand,” said Mr Charles.

The Australian warehouse market continues to be keenly sought by mega tenants looking to consolidate multiple large warehouses into distribution super-sites.

“In Perth, there is little land available for industrial development, so high rentals should be no surprise.”

“The Brisbane industrial market is primarily about proximity to infrastructure improvements.  In fact, Brisbane has had more infrastructure spend than other major transport hubs. Tenants want to be near these improvements and will pay for the benefit.”

London ($19.12 per sq ft per annum) saw an increase in activity for units of 100,000 sq ft or larger. Retail occupiers, followed by 3PLs, continue to be the most active users throughout the market, though the lack of supply held back take-up. As a result, London’s prime rents were stable during the quarter.

Warehouse rents in Singapore ($17.13 per sq ft per annum) are supported by the relatively tight supply of good-quality stock and healthy demand by key logistics companies. Demand was also driven by growth in the transportation and storage sector as well as a resilient retail sector. Approximately 9 million sq ft of new supply is expected through the end of 2014; this should alleviate concerns about the influx of new supply and rents are expected to maintain or see some upside in the longer term.

Despite a challenging economic environment, Helsinki ($16.58 per sq ft per annum) is a newcomer to the top ten rankings, with firms yet to reduce their real estate commitments and demand still relatively strong.

Demand for high-specification warehouse space in Stockholm ($14.22 per sq ft per annum) and Moscow ($13.01 per sq ft per annum) continues to outweigh supply as it has done in many other European cities. Moscow’s vacancy rate remains extremely low at just 1.1% and the pipeline of new supply for the remainder of 2013 is significantly less than previously expected. The majority of available stock is at least 30 kilometres from Moscow, with only 10% of available stock within 10 kilometres from the city.

Hong Kong’s ($13.65 per sq ft per annum) industrial market rents increased 2.6% from last quarter. The market is nearly fully occupied, with no new supply due until 2014. Occupiers have, however; become more cost-conscious due to the weaker business environment. As a result, rents are likely to stabilise in the coming months.