Warehouse Cost Trends: Q1 2024 Insights from Ti’s Warehouse Cost Index
Ti’s latest Warehouse Cost Index (WCI) signals a turning point in the global warehousing market. While the relentless cost escalation seen since early 2022 has moderated in Q1 2024, a complex interplay of factors suggests a potential resurgence in price hikes.

Global Market Overview:
Ti’s WCI, encompassing rent, labour, and energy costs across North America, Europe, and Northeast Asia, reveals distinct regional trends:

• Western Markets (North America, Europe): Year-over-year (YoY) growth has decelerated, with Q4 2023 showing marginal quarterly increases (0.7% in Europe, -3.8% in North America due to Canadian rent adjustments). However, forecasts anticipate a renewed acceleration of costs from mid-2024 onwards, as new construction slows and demand rebounds.
• Northeast Asia: Ample supply is suppressing cost growth, with Q4 2023 experiencing a modest 0.3% quarterly rise. Experts anticipate this region to experience flat or even declining costs in the near term.

Key Market Drivers:

• Elevated Vacancy Rates: A surge in new warehouse supply coupled with moderating demand throughout 2023 has led to higher vacancy rates compared to Q4 2022, temporarily dampening price increases.
• Anticipated Demand Recovery: The global economy’s gradual recovery is expected to fuel renewed demand for warehouse space in late 2024, putting upward pressure on costs.
• Future Supply Constraints: Developers will likely scale back on new projects as demand fluctuates, leading to tighter supply and potentially higher prices in the medium term.

Implications for Businesses:
Businesses should anticipate a continued period of elevated warehousing costs, with the potential for steeper increases in Western markets in the coming years. Proactive planning, including leveraging technology and optimizing supply chains, will be crucial for managing these costs effectively.

Looking Ahead:
While the current lull in cost growth offers some respite, it’s essential to remain vigilant about evolving trends and their potential impact on your business. EWareHub will continue to monitor the situation and provide valuable insights to help you navigate the ever-changing warehousing landscape.