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London retains world's most expensive office market title

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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

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.”


Coming out of the double-digit expansion seen in 2012, prime rental growth in the Americas region was much more subdued, with an overall regional rise of just 1%.  Rental performance in South America in 2013 was slow, deriving from muted growth in the key markets of Argentina and Brazil.  Ongoing economic uncertainty in both of these markets caused occupier demand to ease and prime rents to fall over the year.

Although both Ecuador and Colombia saw burgeoning demand over the year, it was not enough to offset the rental declines in these larger markets.  In the year ahead, South America is likely to face more uncertainty, with economic concerns affecting business confidence in a number of locations, although a steady rise in stability across the region will be seen as North America expands.

In the US, demand levels improved in 2013 as the economy recovered quicker than expected. Over the year, the US saw strong leasing activity, with business confidence improving as the year progressed. However, rental performances were mixed across the country, with New York (Downtown) and Boston outperforming other markets. The outlook for 2014 is for the USA to continue to see rental levels expand and thus drive the overall regional growth in the year ahead.

“New York Midtown (Madison/5th Avenue) has reclaimed its crown as the most expensive office market in the Americas,” said Ron Lo Russo, president, New York tri-state region, Cushman & Wakefield.  He added: “The Madison/5th Avenue submarket is home to many of the city’s trophy assets which command higher asking rents and is a desired location for occupiers, like hedge funds and private equity firms, willing to pay triple-digit rents.”

Asia Pacific

Rental growth was largely flat across Asia Pacific over the year, with an overall regional rental rise of just 2% in 2013.  Economic conditions were more fragile in the first half of the year, although growth in core markets of China and Japan advanced as the year progressed. However, the region is well represented in terms of the most expensive office locations on a global scale.  Hong Kong retained its position in second place overall, Beijing came in fourth position and Tokyo in fifth.  Asia Pacific’s performance in 2014 is anticipated to be similar to that seen in 2013, with slow and stable demand anticipated to keep rental levels largely unchanged, albeit with incentives becoming more competitive.

For 2014, it is expected to remain on course for continued growth, slow but solid as last year, still supporting occupier demand across the region. The key economies of China, Japan and Southeast Asia are anticipated to drive the region forward, with demand for office space particularly in these countries gaining momentum over the year.

John Siu, managing director of Cushman & Wakefield in Hong Kong, said: “While still relatively soft, notably from larger occupiers, demand for prime office space in Hong Kong Central stabilised in 2013. As a result, rents declined by only 1% last year. New supply is extremely limited, but occupier demand remains susceptible to volatility in the financial sector and global economy. Therefore, we are expecting Hong Kong Central rents to be stable in 2014.”


Claudia Buccini

Head of Research Italy

Milan, Italy

Phone +39 02 63799210

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