Brexit and coronavirus have “catapulted” Dublin into being one of the most expensive locations in the world for warehousing.
A survey of warehouse construction costs by project management firm Turner & Townsend placed the Irish capital third behind Tokyo and Hong Kong but ahead of 63 other logistics markets in Europe and across the globe, which included Long Island in New York, Los Angeles, Stockholm, Munich and Paris.
The findings come amid an acceleration in construction costs here and an increasingly heated debate about data centres and their energy consumption.
Turner & Townsend’s latest warehouse cost index suggested Dublin had risen from ninth to third in terms of logistical real estate costs in the space of a year.
"Delays, additional paperwork and extra costs created by Brexit have created a complex landscape for logistics projects in Ireland, " it said.
“Demand for additional space has been created by shifts in the composition of goods traded, stockpiling and alterations to transport routes following Britain’s departure from the EU,” it said.
The report said increasing costs for warehouse construction had become an accepted norm across the globe and was linked to “heated investment in new logistics projects”.
However, supply chain friction linked to Covid-19 and the increasing difficulty of obtaining labour and materials in 2021 have fuelled above-average cost inflation, while providing an opportunity for supply chains to increase margins, it said.
The global cost data pointed to an escalation in average cost, ranging between 5-15 per cent across the global warehousing industry.
Some 83 per cent of respondents said warehouse construction conditions are hot or overheating – characterised by a high volume of projects, intense competition and resource scarcity, it said. These factors are combining to drive up prices.
‘Difficult to predict’
“Although it is very difficult to predict when construction costs will plateau, further volatility is anticipated over the next nine to 12 months in most markets, as the supply chain crisis continues,” it said.
“It will likely be Q3 2022 before there is any real stabilisation, although the coming period is probably not going to be as turbulent as the previous 12 months,” it predicted.
The report noted that several US port-side locations including Long Beach, Oakland and San Francisco also feature in the top 10. In addition to price escalation, excessive lead times is a critical challenge currently, it said.
“Congestion and backlogs at US ports means thousands of full containers are sitting offshore, waiting an average of 8.7 days for a spot at the port,” it said, while noting fewer containers in use means higher prices and more stress on the system.
A recent report by the Society of Chartered Surveyors in Ireland said the cost of building is now rising at twice the rate that it was before the pandemic, and that the last time the sector experienced comparable rates of tender inflation was at the height of the Celtic Tiger.