Cushman & Wakefield, the world’s largest privately owned real estate services firm, announced the Office Space Across the World 2013 report, showing that London’s West End is the world’s most expensive office market once again after regaining its crown from Hong Kong’s Central Business District (CBD).
The report highlights the scarcity of quality space in London which has increased competition and consequently inflated office rents by 2% in the West End to make them the most expensive in the world.
Hong Kong’s CBD drops down into second place, while the Zona Sul area of Rio de Janeiro climbs from 8th last year and powers into the top three most expensive office locations in the world as a result of a 43% rental increase compared to 2011.
Digby Flower, Cushman & Wakefield’s Head of London Markets, said, “As a truly global city, London’s appeal continues unabated. In conjunction with a scarcity of good quality stock prime rents have increased over the year. Equally importantly Cushman & Wakefield expects rents to grow further as the UK gets into recovery mode.
Globally, the office market witnessed prime rents rise by 3% in 2012, but this was largely driven by the impressive levels of growth in South America, particularly Brazil and Colombia. However, although prime rents expanded on a global basis, many markets suffered under continuing economic uncertainty and this led to increased occupier caution. Cushman & Wakefield expects the trend of companies proactively trying to reduce office occupancy costs to continue as the overall global economic outlook remains unsure.
Slower economic growth affected Asia as prime rents rose by only 3% over the year. Despite a clear deceleration in prime rents in both Hong Kong and Tokyo, the two cities ranked 2nd and 5th respectively in the world’s most expensive office locations, highlighting their importance as global business centers.
John Siu, Executive Director of Cushman & Wakefield (Hong Kong), said, “In the last 12 months, we saw office demand in the Greater Central area of Hong Kong experience a slowdown, resulting in a sizable rental decline. Demand fell because of the restructuring among banking and financial institutions which led to office space reduction. Rents will still experience some downward pressure in 2013 due to slightly elevated availability but we believe they will begin to recover, starting in early 2014.”
Beijing, which has experienced previously two years of massive prime rental growth, drops one place to 7th in the global ranking as rents remained stable over the last 12 months. Surplus space has provided a number of alternatives in an increasingly tenant-led market in the city.
Randall Hall, Executive Managing Director of Cushman & Wakefield Greater China, said, “Despite rents having declined or remained unchanged in 2012, three key Greater China office markets – Hong Kong, Beijing and Shanghai – remained among the top 10 most expensive office locations in Asia Pacific. They are still the preferred locations for domestic and multinational companies, and rents have stayed high due to healthy demand. In 2013, economic growth is anticipated to accelerate, particularly in China, but we expect occupiers to stay cautious and focus on rationalizing the space they occupy in these prime locations.”
Connaught Place in New Delhi, India, also posted a considerable rise – prime rents increased by 25% in the last 12 months. In South East Asia, prime rents rose by 6% across the Philippines – caused by demand from the business process outsourcing (BPO) sector – while Jakarta’s CBD in Indonesia experienced a notable rental rise in 2012 of 46%.