Most expensive industrial space found in London, SF, Moscow

Real Estate Weekly, March 26, 2003

In a ranking of the world's most expensive locations for industrial space, Moscow has jumped 14 places to third place behind London's Heathrow airport area, and the San Francisco Peninsula, both of which retain the number one and two positions respectively from last year.

The results are taken from Business Space Across the World 2003, an annual report that looks at the world's most expensive locations for office and industrial space. Produced by Cushman & Wakefield, the global real estate services firm's report surveys 122 markets in 38 countries.

Prime industrial space in the Russian capital nearly doubled in 2002, and a SF per annum now costs $15.05, compared with London's $24.53 and San Francisco's $19.14. Logistics companies are behind the strong demand, with prices being squeezed upwards because of a shortage of good space. While occupancy costs in Moscow nearly doubled in 2002, in London, they fell 3.5%.

David Hutchings, C&W head of European Research, commented: "Industrial rents around the world have, for the most part, held up despite a subdued world economy. They have performed better than anticipated. Only half of the sample countries experienced a decline in rents, with around nearly one in three showing an increase, while the remainder were stable."

Other movers in the global ranking of the most expensive locations for industrial space were Mexico City-up 12 places to 17th; Dublin--up six places to 5th; and Budapest--up five places to 22nd. At the bottom of the ranking is Buenos Aires. Hit by economic crisis, occupancy costs in the Argentine capital are now at $1.10 per SF, with the city dropping 12 places to 38th in the ranking.

Rents in the Americas dropped by just under 6% in 2002, with only Mexico escaping the downturn. However, this figure is an improvement on 2001.

In Europe, Central and Eastern Europe is the focus of growth, with rents rising by an average 20% as the area "consolidates its position as an important industrial region." The report continues: "Both manufacturers and logistics operators are active in the area, but development is restricted to build to suit development, which has prevented oversupply."

On a regional basis, rents in Asia fell by almost 4%, and yet only a third of locations surveyed actually recorded a decline. China has the strongest rental growth, in particular Shanghai, as manufacturing companies attracted by lower land and production costs relocate from elsewhere in the region. Singapore and Taipei, still the region's most expensive location, saw the biggest falls, at 22% and 17% respectively.

The three South African cities of Durban, Cape Town and Johannesburg all show big increases. However, rents in these cities are coming from a low base, being among the least expensive industrial locations in the world.