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Occupier Perspective

Global Occupancy Costs Logistics 2014


Asian
cost advantages to reduce further
SwareQ

22 October 2014
Contents
Section 1 Global ranking

Section 2 Fundamental demand


drivers
4
Section 3 Structural demand
drivers

Section 4 Supply trends

Section 5 Outlook

Definitions

10

Author
Milena Kuljanin
Occupier Research
+ 1 312 424 8028
milena.kuljanin@dtz.com

Contacts
Richard Yorke
Head of Occupier Research
+44 (0)20 3296 2319
richard.yorke@dtz.com
Fergus Hicks
Global Head of Forecasting
+ 44 (0)20 3296 2307
fergus.hicks@dtz.com
Hans Vrensen
Global Head of Research
+ 44 (0)20 3296 2159
hans.vrensen@dtz.com

In this edition of our Global Logistics Landscape report, we present the costs of
occupying prime logistics space in 89 global markets - 25 more than our last
report. Furthermore, we review the cyclical and structural drivers changing the
use of logistics space globally. Finally, we provide our view about the outlook for
occupancy costs across 50 major markets.
Average European occupancy costs are currently USD 120 per sq m per year.
This is 20% higher than the US and 30% higher than Asia Pacific, confirming that
the Asian cost advantage compared to western markets endures. However,
there are low-cost opportunities in every region.
These traditional preconceptions of low-cost Asian and high-cost Western
logistics locations have been challenged by recent changes. Warehouse labour
and logistics property in Asia Pacific have become considerably more expensive,
driven by strong demand. In contrast, labour costs in Europe and the US have
increased very modestly. Combined with decreasing occupancy costs, this trend
has improved the two regions relative cost effectiveness.
A continued recovery of the world economy will encourage consumption,
manufacturing and global trade. Combined with growing E-commerce, this will
bolster demand for logistics space. E-commerce is forcing supply chains to
fragment with increased proximity to urban centres and transhipment nodes.
Consequently, logistics operators are developing increasingly sophisticated
operational forms to improve cost efficiencies and reduce delivery times.
These increased demand-side efficiencies combined with new supply are
expected to limit logistics cost growth over the next five years to below inflation
levels (Figure 1). US and Asia Pacific markets will provide challenges for
occupiers in the short term. Occupiers in Asia Pacific will face further reductions
in cost advantages, reflecting both rising occupancy and labour costs. US
occupancy cost increases are projected to surpass regional inflation.
Meanwhile, European occupiers will benefit from the lowest cost increases,
despite some cities rebounding from recent steep declines.
Figure 1

Forecast pa increase in logistics occupancy costs, end 2014-2018


5%
4%
3%
2%
1%
0%

Lowest increase

Highest increase

Cost growth
Inflation
Source: DTZ Research

DTZ Research

5%
4%
3%
2%
1%
0%

Global Occupancy Costs Logistics 2014

Section 1 Global ranking


Large intra-regional differences in costs
Our analysis of costs reveals that inter regional differences
between Europe, Asia Pacific and US are markedly
smaller than cost differences within these regions (Figure
2). Average European occupancy costs are USD 120 per
sq m per year, 20% higher than the US (USD 100 per sq m
pa) and 30% higher than Asia Pacific (USD 92 per sq m pa).
However, within Europe, the most expensive location
(London Heathrow) is six times higher than the most
affordable (Milan). Similarly, in Asia Pacific, the least
affordable regional market (Hong Kong) is nearly seven
times more costly than the most affordable (Hyderabad).
Intra-regional differences within the US are relatively
smaller than the other regions. Figure 5 provides a more
comprehensive view of costs by location.

Figure 2

Occupancy costs by region (USD per sq m pa), 2014


400

300

London
Hong Kong

200

San Francisco

100
0

Hyderabad

Atlanta

Asia Pacific

US
Average

Milan
Global average

Highest

Europe

Lowest

Source: DTZ Research

Figure 3

Average annual growth in occupancy costs, 2009-2014


Occupiers face steepest cost increases in Asia
Since 2009, the average annual global inflation has been
17 times stronger than growth in global logistics costs.
Although Europe is on average the most expensive region,
costs have decreased year on year since 2009 by an
average annual rate of 0.5%. Numerous logistics locations,
including Dublin, Milan and Kyiv, have seen significant cost
contractions (Figure 3). This partly reflects subdued
economic activity. Conversely, Asia Pacific saw positive
growth, albeit at a rate below the global inflation rate of
3.7%. Hong Kong, one of the markets to experience growth
above the global inflation, is nearly 50% more expensive
now than in 2009. This is due to a combination of strong
demand and reduction in available industrial space due to
office conversion.
Occupiers in China challenged by fast rising labour costs
Labour costs are an important factor in determining
location strategy. Our new labour cost analysis reveals that
wages for warehouse operatives in Europe and the US
have increased modestly over the last five years (1.4% and
1.9% per annum respectively). Conversely, Asia Pacific has
seen an average annual increase of 11%. In Shenzhen and
Qingdao, wages have increased by 17% and 14%
respectively per year since 2009 (Figure 4). This reflects a
significant imbalance between the demand and supply of
labour. Rapidly growing labour costs in Asia, in
combination with increased taxes and regulation, are likely
to accelerate a shift in the economics of global logistics.
Whilst some companies are reshoring operations from
China back to Europe and the US, others are shifting
demand to newer markets in Asia. Nevertheless, it should
be noted that labour costs for warehouse operatives are
still significantly lower in China than in the US and Europe.

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10%

Largest decrease

Largest increase

5%

5%

2.6%

0%

0.2%

0%

-0.5% -0.2%

-5%

-5%
-10%

-10%

Cost growth
Inflation
Source: DTZ Research

Figure 4

Current warehouse operative salary (USD) and average


annual change in salary, 2009-2014
20%
16%
12%
8%
4%
0%
-4%

40,000
30,000
20,000
10,000
0

Average annual growth (LHS)

Annul gross salary, 2014 (RHS)

Source: DTZ Research

Occupier Perspective

Global Occupancy Costs Logistics 2014

Figure 5

Global occupancy costs, Q2 2014 (USD per sq m per year)


Hyderabad
Nanjing
Dalian
Bengaluru
Shenyang
Qingdao
Milan
Atlanta
Memphis
Nairobi
Dar er Salaam
Hangzhou
Wuhan
Chongqing
Chengdu
Delhi
Pune
Tianjin
Guangzhou
Monterrey
New Orleans
Brussels
Chennai
Antwerp
Durban
Marseille
Bucharest
Budapest
Lyon
Shenzhen
Beijing
Dallas
Kyiv
Madrid
Shanghai
Chicago
Barcelona
Prague
Rotterdam
Phoenix
Melbourne
Greater Paris
Rome
Amsterdam
Seoul
New York
Berlin
Philadelphia
Mexico City
Houston
Vilnius
Denver
Istanbul
Global (average)
Tallinn
Montevideo
Dusseldorf
Warsaw
Hamburg
Boston
Buenos Aires
Los Angeles
Frankfurt
Copenhagen
Riga
Dublin
San Diego
Brisbane
Gothenburg
Seattle
Stockholm
Perth
Sydney
Leeds
Miami
St. Petersburg
San Francisco
Taipei
Helsinki
Birmingham
Glasgow
So Paulo
Manchester
Luanda
Moscow
Oslo
Singapore
Zurich
Hong Kong
London

Asia Pacific
Europe
US
Latin America
Africa

The global top 10 most

affordable markets are


dominated by Chinese and
Indian markets

Two US markets are

in the
top ten most affordable list

The worlds most affordable logistics market

Hyderabad is 7 times less expensive than the worlds


least affordable market London Heathrow

The US is split between South and West - Southern


markets Atlanta, Memphis and New Orleans offer more
affordable logistics space than West Coast markets San Francisco,
Seattle and Los Angeles

At $170 per sq m pa, Latin American hub

So Paulo is the ninth least affordable


market globally and more than double
the price of Monterrey

Luanda in Angola is the world's 7th


most expensive market, reflecting
supply shortage and a booming oil
industry

Six of the global top ten least affordable


markets are European. Three of these (London,
Manchester and Glasgow) are in the UK.

50

100

150

200

250

300

350

Source: DTZ Research

www.dtz.com

Occupier Perspective

Global Occupancy Costs Logistics 2014

Section 2 Fundamental
demand drivers
Cyclical and structural economic trends underpinning
regional differences in logistics demand
Logistics demand is highly correlated to GDP and
consumption. Regional GDP as well as private consumption
growth have diverged in recent years reflecting the cyclical
downturn, especially in the West, and the long term
structural changes in Asia Pacific reflecting the rotation
towards a consumer centric economy (Figure 6). Likewise,
manufacturing and transportation - key drivers of the
logistics sector - have diverged, with Asia Pacific recording
strong output growth compared to the US and Europe
where activity has been flat or worse. Emerging markets
such as India, Indonesia and Vietnam have posted
especially strong growth. The changes in occupancy costs,
discussed in Section 1, reflect these economic trends.

Figure 6

Average pa growth in GDP, Consumption, Manufacturing


and Transportation* GVA, 2009-2013
5%
4%
3%
2%
1%
0%
-1%
-2%
GDP

Consumption Transportation Manufacturing


GVA
GVA

EU

US

Asia Pacific

*Transportation includes Warehousing in the US, Storage in Europe and Communications


in Asia Pacific
Source: Oxford Economics

Figure 7

Global trade weighed down by weak European demand


World merchandise trade, another significant driver of
demand for logistics real estate, was deeply affected by
the economic downturn and sudden drying up of trade
finance. This is evidenced by a collapse of trade flows
across all regions in 2009 (Figure 7). The bounce back in
sentiment in 2010 enabled world trade to return to its precrisis level. China in particular made a significant
contribution to the recovery of world trade in 2010, as the
country's exports increased by more than 25%. However,
global trade growth has been sluggish since 2011, mainly
due to the lingering impact of recession and especially high
unemployment in parts of the EU which has continued to
suppress demand. However, recent forecasts suggest that
the economic recovery in Europe will gain momentum
from next year (see Outlook on page 8 for more).

Annual growth in the real value of traded goods (local


currency), 2009-2013

E-commerce powers demand for global logistics


Despite the slowdown in international trade, global ecommerce is growing. Annual business-to-consumers ecommerce sales grew by 18% in 2013 (Figure 8). According
to eMarketers latest forecasts, global B2C e-commerce
sales will increase by 20% in 2014, driven mainly by growth
in Asia. It is also estimated that online retail currently
account for just 10% of all retail sales globally, but this is
expected to double over the next decade. The growth in ecommerce is supercharging the expansion, and increasing
the complexity, of logistics real estate. This is evolving
from traditional distribution activities (to store) to
fulfilment centres (direct to customer). Moreover, the
need for retailers to improve profitability, reinforce brand
differentiation and accelerate delivery times to customers
means that logistics facilities are key revenue drivers.

Business-to-consumer (B2C) e-commerce sales growth by


region (USD bn), 2013

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20%
10%
0%
-10%

-20%
2004-2008

2009

2010

Europe

US

2011

2012

2013

Asia Pacific

Source: Oxford Economics

Figure 8

50%

40%
30%
20%
10%
0%
Latin
America

Asia Pacific

2011

2012

North
America
2013

Western
Europe

Global

2014 (f)

Source: eMarketer

Occupier Perspective

Global Occupancy Costs Logistics 2014

Section 3 Structural demand


drivers
Structural drivers forcing supply chains to fragment
Globalisation, just-in-time (JIT), outsourcing and ecommerce increasingly require global businesses to
establish complex supply and distribution chains. Logistics
users must find a balance between centralised locations
that consolidate inventories and distributed models that
reduce delivery times by being within or adjacent to major
population centres. As a result, proximity to transport
nodes, especially transhipment hubs, is increasingly
important. In an effort to reduce costs, points of supply
have shifted to more distant locations which require an
extended supply chain reliant on air and shipping
especially. This requires substantial investment in ocean
facilities and associated infrastructure. See Box 2
describing the growth of global port activity.
Increasingly sophisticated trade patterns require flexible
and agile supply chains. This is forcing logistics real estate
to evolve into new operational forms as illustrated in Box 1
below.

Box 1: New operational forms

Shared facilities logistics space is leased from a


multi-tenant facility or via an outsourced 3PL (third
party logistics) provider. A 3PL is defined as a firm
that provides multiple logistics services including
transportation, warehousing, inventory
management, packaging and freight forwarding. A
3PL can offer convenient facilities with established
systems and a skilled workforce. This is increasingly
important for firms which require specialized
warehouse services.
Combined operations where online and in-store
distribution reside together in a single facility,
leveraging existing distribution and supply chains.
Distributed fulfilment centres disseminated
fulfilment is achieved by using multiple facilities
located close to customers. The benefits are faster
delivery times, more responsive service and lower
transport costs.

Containerisation is driving down shipping costs and offsetting high and unpredictable fuel costs
The ability of exporters to effectively connect with
international markets depends on the performance of the
entire supply chain in terms of cost, time, reliability and
predictability. Goods in transit are carefully factored into
supply chains, requiring transhipment hubs to operate to
very high levels of capacity and efficiency. This has
underpinned the growth in large ports able to handle the
largest container ships (see Box 2). Moreover, falling
shipping costs, thanks to the economies of scale associated
with containerisation, has offset rising door-to-door
delivery costs which have been driven upwards by high
and unpredictable fuel costs. In addition, technological
improvements have significantly increased the speed of
ships and reduced the time required to load and unload
ships. When this is taken into account, the qualityadjusted cost of ocean shipping has gone down.
Retailers shifting from retail to logistics space can realise
real estate cost savings
It is estimated that e-commerce users typically require
three times the logistics space used by traditional retailers.
However, logistics is significantly more affordable than
retail space (Figure 9). Thus, retailers who shift from instore to online sales can reduce their retail real estate
footprint by storing all products in warehouses and closing
all deals online. This enables significant property cost
savings. This is increasingly important in locations where
competitiveness for retail space as well as affordable
labour is stiff. Retailers in several Asian markets are seeing
rapidly rising wages. These are likely to continue to
increase rapidly across the region over the next few years.
Figure 9

Prime logistics rents vs prime retail rents major


markets, USD per sq m pa
6,000

6000%

4,000

4000%

2,000

2000%

Prime logistics rent (LHS)

0%

Prime retail rent (LHS)

Difference (RHS)

*US retail rents refer to community centres


Source: DTZ Research

www.dtz.com

Occupier Perspective

Global Occupancy Costs Logistics 2014

Box 2: Top Global Ports


Transhipment ports flourishing in Asia
Ports play an important role in world trade. Cities that are
especially well positioned to attract new occupiers are
those that link to the global economy through ports and
airports. Warehouses located near ports can help to
optimise supply chains, reduce shipping costs and enable
companies to undertake a number of other value added
logistics services. The world container port system is
characterized by a high level of traffic concentration. The
20 largest container ports handle nearly half of global
traffic and are important generators of added value and
employment.

Figure 10

Top 20 global container ports, ranked by volume of cargo


handled (million TEUs), 2013
Shanghai
Singapore
Shenzhen
Hong Kong

Busan
Ningbo-Zhoushan
Qingdao
Guangzhou Harbor
Jebel Ali, Dubai
Tianjin

The Journal of Commerces latest global container ports


ranking shows that Asian ports hold 15 of the 20 top port
rankings (Figure 10). They also fill up nine of the top ten
slots, up from just five in 2000. Given the regions
relatively robust economic outlook, widening
manufacturing base and government efforts to improve
infrastructure, it has become a major engine of growth for
global occupiers within the transport and logistics sector.

Rotterdam

Port Klang
Kaohsiung
Dalian
Hamburg

Asia Pacific

Antwerp
Keihin ports

EMEA

Xiamen

The port of Shanghai tops the list, handling 33.6 million


Twenty-Foot Equivalent Units (TEUs) in 2013. Shanghais
status as an international trade hub is supported by the
rapid development of the Chinese economy and the large
industrial and trade base of the Yangtze River Delta region.
The second largest port of Singapore, an important
logistics hub, faces growing competition from other South
East Asian transhipment hubs, including Port Klang
(Malaysia) and the Port of Colombo (Sri Lanka). To
maintain its dominance, Singapore is focusing on more
high-end logistics services and also expanding its container
terminal capacity. By 2020, Pasir Panjang Terminal is
expected to increase port capacity to 50 million TEUs.

Los Angeles

US

Tanjung Pelepas
0

10

20

30

40

Source: The Journal of Commerce

Figure 11

Growth in cargo volume (million TEUs handled), 2013


30%

Largest increase

Largest decrease

20%
10%
0%

Congestion threatens growth in US and Europe


Dalian in China saw the strongest growth in cargo volume
(23%) in 2013, underpinned by a surging domestic
container business (Figure 11). In spite of this, prime
warehouse space remains one of the most affordable
globally. The port of Ho Chi Minh also saw uplift in
volumes. Indeed, the fast-growing Vietnamese hub is
becoming increasingly important for logistics operators.
Outside Asia Pacific, major gateway ports in the US and
Europe are struggling with congestion. Los Angeles is the
only US port to appear in the top 20 list. Long Beach
recorded the fifth strongest year-on-year growth in
volumes of 11%.

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-10%

Source: The Journal of Commerce

Occupier Perspective

Global Occupancy Costs Logistics 2014

Section 4 Supply trends


New supply in Germany outpaces rest of Europe
In Germany, ninety-five warehouses totalling 1.42 million
sq m were completed in the first half of 2014. This is an
increase of 70% compared to the first half of the preceding
year. At end of the Q2 2014 there were 142 warehouses
under construction with a combined space of
approximately 2.8 million sq m. A majority of these
properties are expected to be delivered before the end of
2014. Thus, the total annual completion will exceed three
million sq m this year, a record (Figure 12). In Poland,
international distributors and e-commerce companies
continue to drive demand. This has translated into robust
construction activity. The total grade A stock has grown by
50% since 2008 and it is estimated that the pipeline supply
for 2014-2015 will account for over 20% of the current
total stock. Meanwhile, availability in France has been
limited for several years and activity in H1 2014 points to
continued limitation in the choice of new logistics space. In
the UK, supply constraints are causing occupiers to
increasingly look to the build-to-suit market for good
quality buildings.
E-commerce drives Chinese logistics delivery
Strong activity in the e-commerce industry is driving the
demand for space in Asia Pacific. The supply of grade A
warehouses is expected to grow in major markets (Figure
13). The development pipelines in Hangzhou and Nanjing,
small but growing Chinese markets, account for large parts
of total stock. In Nanjing, the warehouse space to be
completed over the next three years is in fact larger than
the current stock. In Singapore, an estimated 1.5 million
sq m of warehouse space is expected to be delivered
between the start of 2014 and the end of 2016,
representing 19% of the current logistics stock. On an
annual average basis, this pipeline supply is higher than
the 2011-2013 annual average demand of 200,000 sq m.
Large warehouses driving supply in US
Construction in the US is ramping up to meet the growing
demand for warehouse space. Dallas is currently outpacing
the other markets, with a significant amount of new
warehouse and distribution space entering the market in
2014. In 2015 and 2016, occupiers in Chicago will benefit
from a particularly large injection of new space (Figure 14).
Conversely, Los Angeles is seeing limited construction due
to land constraints. However, Inland Empire, situated
directly east of the Los Angeles metropolitan area, will see
1.8 million sq m delivered in 2014-2016. This market
provides a good alternative for operators targeting the
wider Los Angeles area.

www.dtz.com

Figure 12

New logistics supply major markets, Europe


(million sq m)
4

3
2

1
0
Germany

Poland

2013

UK

2014 (f)

France

2015 (f)

Czech
Republic

2016 (f)

NB: UK includes all industrial schemes


Source: DTZ Research, PMA

Figure 13

New logistics supply selected markets, Asia Pacific


(million sq m)
1.0
0.8
0.6
0.4
0.2
0.0
Shanghai

Singapore
2013

2014 (f)

Hangzhou
2015 (f)

Nanjing

2016 (f)

Source: DTZ Research

Figure 14

Warehouse/distribution completion selected markets,


US (million sq m)
1.0

0.8
0.6
0.4
0.2
0.0
Dallas

Inland
Empire
2013

Houston Chicago

2014 (f)

2015 (f)

Los
Northern
Angeles New Jersey
2016 (f)

Source: REIS

Occupier Perspective

Global Occupancy Costs Logistics 2014

Section 5 Outlook
Global economic recovery solid but uneven across regions
The world economy is improving and with it consumption
as well as manufacturing and transport activity. However,
economic growth is likely to be slow and uneven between
and within the regions. GDP and consumption growth will
be especially weak in Southern Europe which means the
entire region will continue to lag behind Asia Pacific and
the US (Figure 15). In the US, increased reshoring and
labour efficiency is sparking a manufacturing rebound. As a
result, productivity growth is forecast to be level with Asia
Pacific. The American South in particular is emerging as a
major manufacturing and logistics hub. Relatively low costs
and tax rates means it is becoming increasingly attractive
for logistics companies relying on low-skilled workers.
Memphis is attracting a number of manufacturing and
logistics operators. Swedish household appliances giant
Electrolux established a 70,000 sq m manufacturing facility
in the city in 2014.
Supply injections to impact costs in Europe and the US
As discussed in section 4, occupiers can expect significant
new supply across all three regions over the next years.
Modest growth in economic demand drivers in Europe and
the US means rental growth in these regions will be
particularly sensitive to new supply. New European supply
in 2014 will be 52% higher than in 2013. In the US, it will
be 64% higher (Figure 16). European occupiers will benefit
from a particularly large injection in 2016, but the US will
see a slowdown in construction activity in 2015. It should
be mentioned that this development pipeline bears a
degree of underestimation. Growing demand is likely to
spur new construction activity which will keep a lid on
rental growth.

Figure 15

Average pa growth in GDP, Consumption,


Transportation* and Manufacturing GVA by region,
2014-2018
GDP

Transport &
Manufacturing

Consumption

5%
4%
3%
2%
1%
0%
-1%
2009-13

2014-18

2009-13

EU

US

2014-18

2009-13

2014-18

Asia Pacific

* Transportation includes Warehousing in the US, Storage in Europe and Communications


in Asia Pacific
Source: Oxford Economics

Figure 16

New logistics supply in Europe* and the US, 2013-2016


(million sq m)
8
6

4
2
0
2013

2014 (f)
Europe

2015 (f)

2016 (f)

US

*Europe includes UK, Germany, France, Czech Republic and Poland.


Source: DTZ Research, REIS

Global cost increases projected to be well below inflation


Our forecasts of the major 50 global logistics markets are
based on projections of outgoings and prime headline
rents. We forecast an average annual uplift of 1.9% in
global occupancy costs to 2018, below the global inflation
rate of 2.8% (Figure 17). The US is the only region where
cost increases are projected to surpass regional inflation.
Asia Pacific is set to see the strongest growth driven by
improving underlying market fundamentals and increased
demand from e-commerce companies such as Alibaba
Group. But, even in Asia Pacific rental growth will be
limited by a steady supply of grade A space. Occupiers in
several CEE markets, including Prague and Bucharest will
benefit from the lowest cost growth globally as supply
adjusts. Conversely, big increases in Dublin costs will
reflect strong demand from expanding logistics operators.

www.dtz.com

Figure 17

Forecast pa increase in occupancy costs, 2014-2018


5%
4%
3%
2%
1%
0%

Lowest increase

Highest increase

5%
4%
3%
2%
1%
0%

Cost growth
Inflation
Source: DTZ Research

Occupier Perspective

Global Occupancy Costs Logistics 2014

Asia Pacific to face highest absolute cost increases


Although Atlanta is amongst the top five centres in terms
of average annual percentage growth in costs, this growth
is from a very low base. As such, the market will continue
to offer comparative value to occupiers. Looking at
absolute changes in costs, we note that on a regional level,
Asia Pacific will see the largest absolute cost uplifts (Figure
18). Hong Kong and Singapore will post the biggest
challenge to occupiers. By 2018, the cost for one sq m of
prime logistics space in Hong Kong and Singapore will have
grown by nearly USD 50 and USD 40 respectively.
Occupiers in Dublin and London (Heathrow) will face the
highest absolute cost growth in Europe.

Costs in London will exceed USD 360 per sq m by 2018. As


such, the UK capital is forecast to remain the most
expensive market globally. Other UK markets, including
Leeds and Birmingham, will also see above average cost
growth on the back of improving demand and unsatisfying
levels of new supply. European low-cost markets, including
Bucharest, Prague and Antwerp will be the most
favourable markets in terms of absolute cost growth.
Labour costs will also increase across all three regions. Asia
Pacific will see the highest increase in percentage terms.
The absolute warehouse operative wage increase is also
close to the levels projected in Europe and the US.

Figure 18

Forecast total increase in occupancy costs (USD per sq m per year) and warehouse operative salary (thousands USD),
2014-2018

20

Bucharest
Prague
Antwerp
Rome
Warsaw
Berlin
Gothenburg
Madrid
Marseille
Lyon
Budapest
Frankfurt
Perth
Greater Paris
Hamburg
Vilnius
Dallas
Boston
Brussels
Chicago
Rotterdam
Philadelphia
Barcelona
Phoenix
Los Angeles
Tallinn
Shanghai
Milan

High

Occupier
favourability

10

30

40

50

Asia Pacific
Europe
US
Wage increase,
thousands

Lowest absolute cost growth

Europe average
US average
Global average
Asia Pacific average

Low

Atlanta
Melbourne
Taipei
Copenhagen
Brisbane
Manchester
Riga
San Francisco
Oslo
San Diego
Helsinki
Amsterdam
Sydney
Denver
Houston
Birmingham
Seattle
Leeds
London
Dublin
Singapore
Hong Kong

Highest absolute cost growth

10

20

30

40

50

Source: DTZ Research, Oxford Economics

www.dtz.com

Occupier Perspective

Global Occupancy Costs Logistics 2014


Definitions

Logistics building
A logistics building is a large-scale industrial premise in
which (a range of) logistics activities are performed,
such as storage and transhipment. The logistics building
is located in a prime industrial area with good transport
links. The building normally consists of approximately
5-10% office, a minimum gross internal floor area of
5,000 sq m and an eaves height in excess of 10 metres.
Gross Internal Area (GIA)
Gross Internal Area refers to the total floor area within
the building measured to the internal face of the
external walls. It includes areas such as internal walls,
partitions, columns, toilets, changing rooms, lift rooms,
boiler rooms and open-sided covered areas.
Prime rent
Prime rent is the highest rent that could be achieved
for a typical building/unit of the highest quality and
specification in the best location to a tenant with a
good (i.e. secure) covenant.
The prime rent is a net rent, excluding service charge
and tax. It is based on a standard lease, excluding
exceptional deals for that particular market.

Total occupancy costs


Total occupancy cost is defined as the total cost of
leasing prime usable space on a gross internal basis.
Total costs include rents, property taxes and service
charges. The definition of service charge varies
depending on the market. Service charges typically
include security, site maintenance and landscaping, and
can also vary depending on the type and size of the
estate.
Total occupancy costs exclude leasing incentives, such
as rent-free periods.
Our rental forecasts refer to prime headline rents. As
such, they do not take changes in incentives into
account.
Main components of logistics occupancy costs
Prime rent
The highest rent that could be
achieved for a typical building/unit of
the highest quality and specification in
the best location to a tenant with a
good (i.e. secure) covenant
Outgoings
Real estate tax and service charges.
Service charges may typically include
security, site maintenance and
landscaping

www.dtz.com

Total
Occupancy
Costs

Occupier Perspective 10

Global Occupancy Costs Logistics 2014


Other DTZ Research Reports
Other research reports can be downloaded from www.dtz.com/research. These include:
Occupier Perspective
Updates on occupational markets from an occupier
perspective, with commentary, analysis, charts and data.
Global Occupancy Costs Offices
Global Occupancy Costs Logistics
Occupier Perspective - User Guide to The Americas
Occupier Perspective - User Guide to Asia Pacific
Occupier Perspective - User Guide to EMEA
Occupier Perspective - Global User Guide
Global Office Review
India Office Demand and Trends Survey 2013-14
Sweden Computer Games Developers November 2013
Property Times
Regular updates on occupational markets from a landlord
perspective, with commentary, charts, data and forecasts.
Coverage includes Asia Pacific, Baltics, Bangkok, Barcelona,
Bengaluru, Berlin, Brisbane, Brussels, Budapest, Central
London, Chennai, Chicago, Delhi, East China, Europe,
Frankfurt, Geneva, Guangzhou & Central China, Hamburg,
Helsinki, Ho Chi Minh City, Hong Kong, Hyderabad, Jakarta,
Japan, Kolkata, Kuala Lumpur, Los Angeles, Luxembourg,
Lyon, Madrid, Manhattan, Melbourne, Milan, Mumbai,
North China, Paris, Poland, Prague, Pune, Rome,
San Francisco, Seoul, Singapore, South & West China,
Stockholm, Sydney, Taipei, Toronto, Ukraine, UK, Warsaw,
Washington.
Investment Market Update
Regular updates on investment market activity, with
commentary, significant deals, charts, data and forecasts.
Coverage includes Asia Pacific, Australia, Belgium, Czech
Republic, Europe, France, Germany, Italy, Japan, Mainland
China, South East Asia, Spain, Sweden, UK, US.
Money into Property
For more than 35 years, this has been DTZ's flagship
research report, analysing invested stock and capital flows
into real estate markets across the world. It measures the
development and structure of the global investment
market. Available for Global, Asia Pacific, Europe, North
America and UK.
Foresight
Quarterly commentary, analysis and insight into our inhouse data forecasts, including the DTZ Fair Value Index.
Available for Global, Asia Pacific, Europe, UK and China. In
addition we publish an annual outlook report.

www.dtz.com

Insight
Thematic, ad hoc, topical and thought leading reports on
areas and issues of specific interest and relevance to real
estate markets.
Great Wall of Money October 2014
German Open Ended Funds October 2014
Insight Singapore medical suites September 2014
China Insight Establishing the Capital Economic Region Aug 2014

Insight European Transaction Based Price Index Q2 2014


Insight European Nursing homes -July 2014
Insight GB Retail Property Health Index (RPHI)- July 2014
Insight Beijing TMT Office Occupier Survey- June 2014
Net Debt Funding Gap - May 2014
China Insight Office Pipeline and Dynamics May 2014
Insight Deflation and Commercial Property - March 2014
Insight Tokyo Retail Market 2014
China Investment Market Sentiment Survey - January 2014

DTZ Research Data Services


For more detailed data and information, the
following are available for subscription. Please
contact graham.bruty@dtz.com for more
information.

Property Market Indicators


Time series of commercial and industrial
market data in Asia Pacific and Europe.

Real Estate Forecasts, including the DTZ Fair


TM
Value Index
Five-year rolling forecasts of commercial and
industrial markets in Asia Pacific, Europe and
the USA.

Investment Transaction Database


Aggregated overview of investment activity in
Asia Pacific and Europe.

Money into Property


DTZs flagship research product for over 35
years providing capital markets data covering
capital flows, size, structure, ownership,
developments and trends, and findings of
annual investor and lender intention surveys.

Occupier Perspective 11

DTZ Research
DTZ Research Contacts
Global Head of Research
Hans Vrensen
Phone: +44 (0)20 3296 2159
Email: hans.vrensen@dtz.com
Head of Occupier Research

Global Head of Forecasting

Richard Yorke

Fergus Hicks

Phone: +44 (0)20 3296 2319

Phone: +44 (0)20 3296 2307

Email: richard.yorke@dtz.com

Email: fergus.hicks@dtz.com

Head of EMEA Research

Head of North Asia Research

Magali Marton

Andrew Ness

Phone: +33 (0)1 49 64 49 54

Phone: +852 2507 0779

Email: magali.marton@dtz.com

Email: andrew.ness@dtz.com

Head of Americas Research

Head of South East Asia and Australia New Zealand Research

John Wickes

Dominic Brown

Phone: +1 312 424 8087

Phone: +61 (0)2 8243 9999

Email: john.wickes@dtz.com

Email: dominic.brown@dtz.com

DTZ Business Contacts


Global Corporate Services

US Tenant Representation

Steven Quick

Greg Schementi

Phone: +1 312 424 8182

Phone: +1 312 424 8141

Email: steven.quick@dtz.com

Email:greg.schementi@dtz.com

Global Corporate Services, EMEA

EMEA Logistics

James Maddock

Robert Hall

Phone: +44 (0)20 3296 3353

Phone: +44 (0)20 3296 2076

Email: james.maddock@dtz.com

Email: robert.a.hall@dtz.com

Global Corporate Services, Asia Pacific

Asia Pacific Logistics

David Jones

Tony Su

Phone: +65 6876 6160

Phone: +86 21 2208 0088

Email: david.jones@dtz.com

Email: tony.zy.su@dtz.com

DISCLAIMER
This report should not be relied upon as a basis for entering into transactions without seeking specific,
qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no
responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this
report. Information contained herein should not, in whole or part, be published, reproduced or
referred to without prior approval. Any such reproduction should be credited to DTZ.
DTZ October 2014

www.dtz.com

Occupier Perspective 12