London is the most expensive city in the world for warehouse space as rent increases continue to outpace inflation. 

The total cost of occupying the best warehouses, including rents, service charges and taxes, rose 10% in the year through June, according to data compiled by Savills Plc. The UK capital remains by far the most expensive city, with the best space costing $41.68 a square foot, compared with $27.44 in Sydney, which ranked second, the broker’s data show.  

Warehouse rents are rising as retail businesses continue to move online and manufacturers reevaluate their supply chains in light of the coronavirus pandemic and geopolitical risks. Rents for the best warehouses gained almost 12% in the year through June, even as global economic growth began to falter. Still, there are signs that the pace of warehouse cost inflation is slowing, with total costs up 4.4% in the first half of this year, compared to a 5.4% increase in the six months through December. 

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