London and Sydney are home to the world’s most expensive warehouses, according to the latest analysis by Savills World Research.

In an update to its 2023 Impacts program, Savills analysed warehouse markets around the world, finding total warehouse costs, including rent, service charges and taxes, increased 10.1% in the year to June 2023.

Savills found prime warehouse space in London was the priciest of the 52 markets examined, at USD42 per sqft.

Sydney leapfrogged into second place, with warehouse space costing USD27.50/sqft., displacing Hong Hong to fourth (US $26/sqft.). Los Angeles, meanwhile, remained third (US $27/sqft).

Savills says warehouse rental growth has continued to outstrip inflation, even though the pace of property costs increases slowed in the first half of 2023 to 4.4%, compared to a 5.4% rise in the first half of last year. 

Savills World Research director Paul Tostevin says: “While the rate of warehouse property cost increases may be decelerating, higher costs are here to stay. 

“Nonetheless, even in the currently cheapest locations, in the long term, population growth and structural trends are likely to fuel demand for goods and services, and in turn warehouse requirements; this applied not only to developing economies, but in the growth hotspots of developed ones.  

“That only increases occupier emphasis on the best located, most efficient warehousing space, underpinning demand for prime warehouses and in turn future rental growth.”

Savills says that in addition to warehousing property costs, occupiers also need to consider labour costs (usually a higher percentage of their total expenditure) which have risen by 7.4% in the 12 months to June 2023 across the 52 markets examined, and the electricity and diesel costs associated with operating buildings and large fleets of vehicle.  

Diesel costs are falling, but electricity costs continue to rise – again emphasising the importance of prime space that may be more energy efficient or even have their own power generation on site.