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.
Characterized 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.
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.
Looking ahead to 2014, the region is expected to see the economic slowdown largely reverse and occupier demand to expand across the majority of the region. The key economies of China and Japan are anticipated to drive the area forward, with demand for office space particularly in these countries gaining momentum over the year.
Highlights for 2013
• 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
• Americas office performances were polarised – while the USA and Mexico saw prime rents rise, prime rents declined in some of the larger South American locations
• EMEA recorded a regional rental uplift of 3% – the highest regional rise seen since before the depths of the economic downturn
• In Asia Pacific rental growth was largely flat on the back of a slowing economy; however, the economic climate improved as the year progressed
“In Vietnam there was continued pressure on rents in Ho Chi Minh City and Hanoi with rents decreasing 7% and 6% respectively year-on-year. We now expect a split in terms of trajectory across the country with HCMC rents already stabilizing as vacancy remains low with limited new stock coming online. Hanoi already has an occupancy rate below 80% and is due to receive a lot of new supply likely to force rents lower.” Alex Crane - New National Head of Commercial Agency, Cushman & Wakefield in Vietnam commented.