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Industrial commercial property markets in Central and Eastern Europe (CEE) and South America were the best performing globally in 2008, according to the latest edition of the Industrial Space Across the World report from real estate adviser Cushman & Wakefield.

The occupational market for industrial property deteriorated throughout the world in all but a handful of markets in 2008 while global rental growth slowed to 2.4% down from 6.1% 2007. The more mature markets of North America and Western Europe were the first to underperform early in 2008, but by year end all regions of the world had been affected by the global economic downturn.

Annual rental growth in CEE, however, was 6.7% in 2008, virtually unchanged from 2007. The Polish and Ukrainian markets were both very active over the year, with considerable demand for a relative shortage of quality accommodation. Rents increased in Poland by 28% in 2008 and in Kiev, Ukraine by 25%.

For the eighth consecutive year, Heathrow, London was the world’s most expensive industrial location with an occupancy cost of €185 (EUR 200) per m² per year followed by Tokyo, Japan at €179. Dublin, Ireland fell to third place from second with annual occupancy costs of €157 per m² annually.

'The CEE region has been outperforming its "old" European neighbours for the last decade, in terms of both growth in construction and take up of industrial space,' noted Ferdinand Hlobil, Head of Industrial, Cushman & Wakefield CEE. 'The shift of production and distribution from the West to the East has been the main driver over recent years. This is expected to continue, primarily due to the fact that about 40% of the European population is located in Central and Eastern Europe. The large potential consumer market in CEE is still very much under-developed, and even when taking into account the present global crisis, we expect the growth of the industrial market to continue in the medium term.'

Western Europe may still have the most expensive industrial location in the world, but performance in terms of rental growth was subdued in 2008, added Barrie David, Senior Research Analyst, Cushman & Wakefield. 'Most Western European countries saw rents hold firm in 2008 as occupier demand steadily declined over the year. In fact, the global downturn in rents is really demand led, as many industrial markets remain undersupplied in terms of modern space. Falling take-up is a trend evident across most global industrial markets and one that is expected to continue well into 2009.'