Warehousing costs in Dubai rose by 7.7% in the 12 months to June 2022, making it one of the most premium warehousing markets in the world, according to a Savills update as part of its 2022 Impacts programme.

Across 52 global markets monitored by Savills, the average cost of warehouse property increased 8.4% between June 2021 and June 2022, as demand surged for industrial and logistics space in the wake of the pandemic.

London is the most expensive warehousing market in the world, with an average prime occupancy cost of USD 35 per sq ft (rent, service charges and taxes), followed by Hong Kong (USD 26) and Tokyo (USD 22).

Strong demand and lack of Grade A stock in Dubai has led to warehouse occupancy costs rising to USD 19 per sq ft, putting it in fourth position.

Meanwhile, in the US, whilst warehouse costs are generally lower, they have seen some of the biggest proportional increases in the past 12 months: occupancy costs in the seven major industrial markets space rose by an average of 20.1%.

Warehousing property costs around the world

Swapnil Pillai, Associate Director - Research, Savills Middle East said: “Dubai is an established logistics market in the region with sectors such as e-commerce, and third-party logistics (3PL) expanding activity following the onset of the pandemic. The entry of new international companies, especially in the engineering and manufacturing sector, has also accelerated as a result of favourable business setup opportunities provided by the government and has boosted demand for warehousing space.” 

According to Savills, rising warehouse costs are only part of occupiers’ decision-making process when it comes to space: labour costs have also risen an average of 6% globally in the past year, whilst electricity and diesel costs jumped 39.4%.

Paul Tostevin, Director in the Savills World Research team, comments: “Changing consumer behaviour, the ecommerce boom and shifting supply chains, resulting in a lack of space and rental growth in many highly constrained markets, have driven the global warehousing market to new heights. Weakening consumer sentiment and higher energy and labour costs have not yet impacted demand or rents, and given the lack of grade A supply in many markets, costs are likely to remain high for the best located space. This will also be supported by further demand for the most highly rated sustainable buildings as retailers look to ‘green’ their supply chains.”

The lowest warehousing property costs can be found in India, at between USD 3 and USD 4 per sq ft. Lower ecommerce penetration rates and a less developed manufacturing sector mean that India has yet to see the same development as other markets, but it offers significant potential thanks to a vast prospective consumer market for online retail, and as a lower cost manufacturing base.