London office space

The world’s top ten most expensive office locations saw rents, a large component of occupancy costs, increase by an average 40 percent last year, according to ‘Office Space Across the World 2008’, a global report by real estate services firm Cushman & Wakefield.

In this year’s ranking, London retains its title as having the most expensive office occupancy costs in the world, with one sq m of prime space in London’s West End at £1,700 a year, with rents up 30 percent last year in local currency terms. In second place is Hong Kong, at £1,300, where rents were up 40 percent last year in local currency terms.

The world’s ten most expensive office locations

2008 Ranking (2007 Ranking) City, Country Total cost £/sq m/per annum
1 (1) West End, London, UK 1,700
2 (3) Hong Kong, China 1,300
3 (2) Tokyo, Japan 1,145
4 (5) Mumbai, India 905
5 (7) Moscow, Russia 865
6 (4) Paris, France 772
7 (17) Singapore 711
8 (10) Dubai, UAE 687
9 (6) Dublin, Ireland 614
10 (9) Midtown, New York 546

Office Space Across the World 2008 compares office occupancy costs in 203 key locations in a record 58 countries around the world, with new entries in the global ranking including Kiev in Ukraine (16th) and Vietnam’s Ho Chi Minh City (17th place).
Of these 203 locations, 79 percent showed rental growth last year, 20 percent stable rents and only one per cent showed a rental fall (compared with 6 percent the previous year). Overall globally, rents grew by 14 percent in 2007, compared with 10 percent in 2006.

Elaine Rossall, Head of Business Space Research & Consultancy for Cushman & Wakefield in EMEA, says: “Last year saw the fastest level of growth in office occupancy costs in many of the world’s top locations since the turn of the property cycle in 2001, with the strongest demand coming from the financial sector. Behind this growth is a shortage of top-quality product as developers remain relatively cautious, especially compared with the previous peak years of 2001 and 2002.”

Looking forward, Ms Rossall says: “We are unlikely to know the full effects of the current credit squeeze on the world’s main office locations until further into 2008. In the meantime, we foresee the market for the right product in the right location remaining robust, especially in the more buoyant markets of Asia Pacific, although expectations are that last year’s strong rental growth will ease this year.”

Regarding the No. 1 position of London’s West End, Guy Taylor, Head of West End Office Agency in the London office of Cushman & Wakefield, comments: “Around 50 percent of office requirements in Mayfair/St James came last year from the financial sector, attracted by the top-quality space on offer and the unbeatable location. There still remains a healthy level of such requirements, although it is clear that the past levels of strong rental growth have slowed.”