Strong demand amid dwindling supply in London’s West End pushes rents up by 5%
• London confirms its position as the world’s most expensive office market for the second consecutive year
• Hong Kong ranks second after losing top spot to London last year
• Global office rents increase by 3% overall
• At 52nd place in the table, Bratislava clearly represents an extremely attractive location from an occupiers perspective, even within a Central European context, at a 35% discount to Warsaw, a 25% discount to close neighbours Vienna and Budapest and a 20% discount to Prague
London’s West End is the world’s most expensive office market for the second year in a row, retaining its title ahead of runner-up Hong Kong, according to research published today in Cushman & Wakefield’s annual Office Space Across the World report.
Characterised by strong demand and a dwindling supply of high quality space, the West End of London saw office rents increase by 5% in 2013. Furthermore, with rents largely unchanged in Hong Kong Central over the year, the gap in total occupancy costs between the two cities has widened.
“London remains attractive for many international businesses as its global appeal continues to grow. With prime space at a premium in the West End and a steady demand for offices from across all sectors, significant rental growth can be anticipated in 2014,” said Digby Flower, Cushman & Wakefield’s UK chief executive and head of London markets.
Global office rents moved up by 3% in 2013, the third consecutive year of similar rental performance, while all three regions overall witnessed a relatively slow pace of rental growth over the year. However, certain areas – such as Africa and the Middle East – saw a more buoyant rental market, with prime rents up by as much as 10% in certain locations.
Moscow’s central business district (CBD) surged from sixth position in last year’s ranking to third, with rents holding firm over the last 12 months as occupier demand remained consistent. Meanwhile, rental growth was predominantly flat across Asia Pacific with Beijing, Tokyo and New Delhi’s Connaught Place mostly stable over the year. However, Connaught Place fell from fourth position to eighth due to an appreciation in both the US dollar and euro against the Indian rupee in 2013; this caused a shift in New Delhi’s position in terms of global occupancy costs when measured on a dollar or euro basis.
In Europe, a lack of high quality space characterised a number of markets, including London and Frankfurt, and with demand in these cities advancing over the year, prime rents were put under upward pressure. Therefore, although the overall regional picture was relatively muted over the year there were notable differences from market-to-market. A regional uplift of 3% was recorded overall – the highest regional rise seen since before the depths of the economic downturn in 2008.
The most significant rental expansion within the EMEA region was in the Middle East and Africa where rents increased by 14%. Both Qatar and Dubai saw business confidence pick up through the year, resulting in increased office market activity as well as supporting prime rental growth of 10% and 5%, respectively.
However, it was South Africa that experienced the highest rental growth in the EMEA region in 2013, with prime rents accelerating by almost 30%. The South African market saw a notable increase in the amount of large transactions over the year in the midst of a particularly active occupational market.
James Young, Cushman & Wakefield’s head of EMEA offices, said: “Looking ahead for EMEA, the overall lack of high quality space is expected to push many occupiers towards moving sooner rather than later, as they look to secure deals on the limited supply of quality space that is available. With the development pipeline anticipated to continue at low levels until the latter part of 2014, prime rents are likely to remain under pressure.”