The world's leading centres have suffered an unprecedented decline in demand for office space which has contributed to the first aggregated global fall in prime office rents since 2003. Global real estate adviser Cushman & Wakefield, in its new Office Space Across the World report, says that 2009 recorded a steep and widespread fall in office demand with every region in the world recording falling prime rents for the first time.
The world's leading centres have suffered an unprecedented decline in demand for office space which has contributed to the first aggregated global fall in prime office rents since 2003. Global real estate adviser Cushman & Wakefield, in its new Office Space Across the World report, says that 2009 recorded a steep and widespread fall in office demand with every region in the world recording falling prime rents for the first time.
The outlook for 2010, however, is more positive. As some major economies return to growth, demand for office space from corporates is likely to once again increase and reduce supply, C&W claims. Rental growth is already being recorded in some of the world’s leading office markets such as the City of London and Paris CBD, and rents globally are expected to reach their low point by the middle of the year. The second half of 2010 will therefore be one of recovery and cautious optimism from both landlords and occupiers, the report predicts.
Kiev, Ukraine and Dublin, Ireland were the biggest fallers in Europe with more than -50% and -38% respectively wiped off the value of prime office rents by year end. Even previously resilient markets were affected including London's West End which recorded a -25% decline, and Warsaw's CBD which recorded a -24% decline.
The largest prime office rental falls were in the key cities of Asia Pacific with Singapore, Hong Kong and Tokyo recording declines of -45%, -35% and -21% respectively. Ho Chi Minh City, Vietnam saw the largest regional rental compression with a fall of -53%.
In the Americas, rents overall declined by -7% during 2009. In the US, Boston, San Francisco, Seattle and New York’s Downturn recorded the biggest falls respectively at -26%, -24%, -23% and -23%. South America was more resilient with rents in Santiago, Chile bucking the trend and actually increasing 28% although the market is small and characterised by a limited supply of Grade A office space. Buenos Aires, Argentina recorded the biggest fall in South America at -14% whilst the region's largest economy, Brazil, recorded a fall of -8%.
In the ranking of the world's most expensive office locations, the three top locations remained constant with Tokyo moving into first place from second with full office occupancy costs (prime rents plus taxes and service charges), costing EUR 1,441 per m2 per year. London's West End moved from third to second place with full occupancy costs of EUR 1,220 per m2 per year and Hong Kong fell from first to third position with full occupancy costs of EUR 1,207 per m2 per year.