The World's Top 10 Most Expensive Office Markets Have Been Revealed.

 

According to research published today in Cushman & Wakefield's annual Office Space Across the World worldwide rankings, London's West End is the world's most expensive office market for the third year in a row, keeping its position ahead of runner-up Hong Kong. propertyfinder qatar

Prime rentals in London's West End have increased by 4.6 percent this year, but remain 13 percent below their 2007 peak. However, with low supply and scheduled new completions in 2015, more positive rental growth is expected.

For the third year in a row, London remains the most expensive office market in the world.

For the second year in a row, Hong Kong is ranked second.

New York completes the top three, climbing two spots.

In the 12 months leading up to December 2014, global rents increased by 7%.

George Roberts, the head of London markets at Cushman & Wakefield, stated, "With a truly global appeal, London continues to draw significant international corporations seeking to establish a presence in the city, which frequently use it as a gateway to Europe. As the UK's economy continues to surpass expectations, there will be increased demand for London office space in 2015. Rental growth is projected to continue as supply declines."

Global office rentals increased by 7% in 2014, more than doubling the 3% annual compound growth seen since 2010. Globally, foundation cities reaffirmed their place in the global order last year, at the detriment of smaller, peripheral markets.

For occupiers, challenges continue, not only in terms of property fundamentals, but also in terms of geopolitical dangers, which some are watching with understandable trepidation. Some occupiers are using these considerations to obtain more flexible lease terms or lower rents, especially in oversupplied areas.

 

REGIONAL RANKING: James Young, EMEA Cushman & Wakefield's head of EMEA offices, stated, " "The low level of development provided over the last two years has been a prominent trend in the European office market. Despite a recent upswing in development activity, the recovery is supply-driven, as occupiers want excellent space that provides the ideal atmosphere for employees in a highly competitive labor market."

However, in under-supplied markets such as London, there is some divergence: in order to secure space, some occupiers are relocating sooner than projected in order to get the larger, more flexible floor plates they require. Secondary space is becoming a more realistic choice for some as quality availability dwindles, and while rents have been relatively stable, an upward trend is projected over the next 12 months.

In addition to London solidifying its position as a true gateway city at the top of the global list, Moscow comes in second in the EMEA region, despite a 17 percent drop in prime rentals due to sanctions imposed following the annexation of Crimea and ongoing civil instability in Ukraine.

In EMEA, Paris rounds out the top three, although rentals fell -6.3 percent and occupancy costs fell -3.9 percent year over year. Dublin has risen six places to 19th place in the global ranking in 2014, topping the chart for the largest percentage growth. Meanwhile, occupancy costs in Dubai and Doha rose four and three places, respectively, to become the 11th and 13th most costly locations in the world for offices.

 

ASIA PACIFIC REGIONAL RANKING

Cushman & Wakefield's Hong Kong managing director, John Siu, said: "Leasing activity in Asia Pacific is still increasing, albeit to varied degrees. With pent-up demand in several of the region's main sites and good service sector growth, most of the region's gateway cities are likely to witness further rental growth in 2015."

Because the majority of core markets have vacancy rates below 7%, they will be able to support some new development while while maintaining rental values. However, there are a few exceptions: select second-tier Chinese cities and key Australian cities, where current supply combined with new construction will put downward pressure on rental increases.

Aside from Hong Kong's second place in the global ranking, Connaught Place in New Delhi is the next highest-ranked district in Asia Pacific, followed by Tokyo in third place. Beijing remains in a strong fourth place in the area. Manila experienced the highest rise in occupancy prices in the Asia Pacific region, with significant development in outsourcing and offshoring services projected to keep office demand robust in the future.

While China's economy is outpacing that of most other countries, it is weakening, putting downward pressure on domestic demand. Despite a drop in rentals throughout the year, Beijing is the best-performing Chinese city, maintaining its fourth-place regional standing.

 

THE AMERICAS REGIONAL RANKING

"The accelerating US economic recovery is quickly propelling the Manhattan office market beyond equilibrium in favor of landlords, resulting in falls in the amount of quality space available, which should lead to solid rental increases in 2015," said Ron Lo Russo, president, Cushman & Wakefield's New York tri-state region.

Manhattan (Midtown: Madison/5th Avenue) in New York takes first place in the region, followed by Rio de Janeiro and So Paolo in Brazil. In 2014, there was no change in the top three cities, which remained same from 2013.

New York City continued to have solid job growth, with much of the expansion in office-using positions coming from the technology, advertising, media, and information industries, as it has done during the recovery.

Large purchases fueled occupant activity in New York City, with total take-up hitting 32.8 million sq ft in 2014, the highest level in more than 15 years. The return of the'mega-deal' boosted activity, with 28 new agreements totaling more than 100,000 square feet completed, while solid leasing activity pushed vacancy rates to single digits for the first time since July 2012.

Given its exposure to the oil sector, which has seen barrel prices collapse in recent months, Houston is a noteworthy market. This had no effect on rentals in 2014, but it is expected to have an impact in 2015 as corporations strategize on how quickly and in what form the rebound will occur. The demand for additional office space, as well as the rate of new building, is likely to slow. However, job growth is predicted in Houston, albeit at a slower pace than in recent years, and the current economic condition is expected to be more of a 'halt' than a'standstill.'