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Last year we reported on London’s position in the world office market, particularly in terms of price per square foot. Once again, for the second year in a row, the West End has claimed the prize as the most expensive office market in the world.
Hong Kong, whose office market is renowned for its high cost per square foot, once again came in after the West End, partly because rents in this London area continue to rise.
Prime Grade-A office space is at a premium in the West End and hence prices rise to match. Competition is fierce for the status of an office here, and the lack of supply and reluctance of tenants to move elsewhere once they are in the area, contribute to the continuous high prices we have seen this year – and last – when they increased by 5%.
According to a Cushman & Wakefield report, the average rent for London last year was $271.61, while that of Hong Kong was $183.32. Moscow took third place with average rents of $139.80. The remaining two places in the world’s top five went to Beijing and Tokyo.
The report is just one among several, but all statistics taken recently point to a general high-end office market in the traditionally expensive parts of the UK capital. St James’s is also found up top in terms of rents, for similar reasons as the West End: lack of the right kind of supply and increasing demand, especially since overseas investors have continued to see the UK as a good place to invest in recent times.
Worldwide, office rents rose by 3% in 2013, with some burgeoning and robust markets, particularly Africa and the Middle East, contributing as much as 10% to this world average. Europe’s regional rents also matched the average, increasing by 3%. South America bucked the trend, among economic and, to an extent, political uncertainly, with rents increasing only 1%. South Africa outperformed most, with a very high rental growth of almost 30%.
While Asia-Pacific’s rents barely increased, the average rents here are high already compared with much of the rest of the world. However, during the coming year it is expected that China, Japan and South East Asia and their developing or strengthening economies will lead to a higher increase in the region in rental values.
Overall, demand may increase in the short term as occupiers worldwide try to take space before rents increase even further.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.