London Is World's Priciest Office Location

Source : The Straits Times, Feb 13, 2008

LONDON - LONDON office rents were the most expensive in the world in 2007 and are now triple the average paid by occupiers in New York's Midtown business district, research from real estate broker Cushman & Wakefield showed.

The firm's annual Office Space Across the World report on Wednesday showed London's reputation as a hub for global financial markets helped to reinforce its status as the world's most costly office rental market last year, with rents double those in Paris and four times levels in Frankfurt.

The data compares office occupancy costs in 203 key locations in 58 countries around the world.

Of these 203 locations, 79 per cent showed rental growth last year, 20 per cent showed stable rents and only one per cent showed a drop in rental values in 2007, compared with 6 per cent in 2006.

Cushman & Wakefield said a single square metre of prime office space in London's West End commanded annual rent of 2,277 euros (S$4,700) in 2007. Supply-constricted Hong Kong was named the world's second most expensive office location, with rents of 1,745 euros per square metre.

Moscow rose two places in the 2007 ranks, breaking into the top five for the first time. India's Mumbai market leapfrogged both Paris and Moscow to take fourth position, with rents said to be 1,214 euros per square metre.

Prime office rents in Singapore rose 78 per cent last year in local currency, helping Asia Pacific to achieve the strongest regional growth, with overall rents rising 23 per cent in 2007.

But Singapore's growth was eclipsed by Istanbul, where rents in the prime Levent district soared 95 per cent in local currency terms in 2007 on the back of a Turkish economic boom.

Cushman & Wakefield said rents had risen by an average 40 per cent in the world's top 10 office locations in 2007 but said the pace of growth could drop off in 2008 as the United States battles to fend off recession and Europe's biggest banks assess staff numbers in the wake of the subprime mortgage crisis.

London West End rents rose 30 per cent in local currency terms in 2007 but uncertain occupier demand and an increase of supply could curtail growth this year, spelling tougher times ahead for landlords, particularly those in the nearby City financial district.

Some market experts believe a wave of London skyscraper developments planned by UK real estate investment trusts (Reits) such as Land Securities and British Land will put heavy pressure on rental growth beyond 2009.

According to UK property services firm Savills, up to 13 million square feet of office space is due to come onto the London office market in 2008 and 2009. -- REUTERS