Warehouse workers earn the smallest salaries in China and India. In the United states? The salary of the average warehouse worker here is nearly five times higher than what the average warehouse worker brings home in China.
But here’s a surprise: A new report from DTZ Research finds that occupancy and labor costs for logistics operators have fallen in both the United States and Europe. At the same time, these costs have increased sharply in Asia.
Of course, occupancy and labor costs are still far higher in Europe and the United States. But DTZ in its 2014 Global Occupancy Costs — Logistics Report found that the gap is shrinking, at least slightly.
The report says that global occupancy costs will increase at a modest average annual rate of 1.9 percent through the end of 2018. That’s below the global inflation rate, good news for operators.
The news was good, too, for landlords in the United States, said Richard Yorke, global head of occupier research for DTZ.
“Landlords in the U.S. are starting to get the upper-hand as demand for warehouse space grows,” Yorke said in a written statement. “This will translate into cost increases that will surpass the U.S. inflation level.”
Yorke said that Atlanta and Houston should experience some of the fastest growth in occupancy costs across the globe through 2018.
Some of the more interesting research, though, focuses on labor costs for warehouse workers across the globe. According to DTZ, while the average warehouse worker salary in the United States remains about five times higher than in China, the Asia Pacific region has seen the highest increase in labor costs since 2009, an average annual growth rate of 11 percent. That is far higher than the annual average growth rate of 1.4 percent for warehouse worker salaries in the United States and Europe.
Milena Kuljanin, author of the DTZ report, pointed to the city of Shenzhen in southern China. Here, warehouse workers’ wages have increased by more than 15 percent each year since 2009.
“This reflects an imbalance between the demand and supply of labor, and also indicates a shift in the economics of global logistics,” Kuljanin said. “Future increases in wages and occupancy costs will further reduce China’s cost advantage.”
Europe has seen declines in occupancy costs during the last five years. But it still remains the least affordable region for occupiers across the globe, according to DMZ. Six of the top-10 most expensive markets are in Europe, with London coming in at the top. In the United States, the most affordable markets for occupiers are clustered in the south, markets such as Memphis, Atlanta and New Orleans. Costlier markets are generally on the West Coast, cities such as San Francisco and Los Angeles.
Greg Schementi, head of U.S. tenant representation at DTZ, said that the report offers plenty of evidence that operators in the United States need to rely more than ever on technology.
“Increased occupier demand in the United States, and with it rising costs, will require logistics facilities to deliver greater efficiencies,” Schementi said in a written statement. “This is driving the supply of larger, more technologically advanced warehousing in close proximity to urban areas.”