London’s West End is the world’s most expensive office market once again after regaining its crown from Hong Kong’s Central Business District (CBD), according to research published today in Cushman & Wakefield’s Office Space Across the World 2013.
The report highlights the scarcity of quality space in London which has increased competition and consequently inflated office rents by 2% in the West End to make them the most expensive in the world.
Hong Kong’s CBD drops down into second place, while the Zona Sul area of Rio de Janeiro climbs from 8th last year and powers into the top three most expensive office locations in the world as a result of a 43% rental increase compared to 2011.
Globally, the office market witnessed prime rents rise by 3% in 2012, but this was largely driven by the impressive levels of growth in South America, particularly Brazil and Colombia. However, although prime rents expanded on a global basis, many markets suffered under continuing economic uncertainty and this led to increased occupier caution. Cushman & Wakefield expects the trend of companies proactively trying to reduce office occupancy costs to continue as the overall global economic outlook remains unsure.
Office space in CBD showed a marginal increase of 2% in 2012 with 30,589KRW/sq m/month. Yeouido market witnessed an considerable increase of 7% in rents of 22,242KRW/sq m/month and Gangnam showed no change in 27,167KRW/sq m/month respectively over the year.
Tony Yoon, Senior Director for Cushman & Wakefield Korea says “Leasing activities remained healthy in 2012. Many conglomerates moved to new prime buildings to take advantage of abundant space options. However, although CBD’s vacancy rate has been falling down consistently in 2012, the expected new office space supply will boost the vacancy rates in 2013. Landlords are likely to continue offering lease incentives in the CBD area. Meanwhile, several IT companies have moved out of the Seoul & Gangnam area, to the newly built, Pan-gyo Techno Valley in 2012. Although the GBD has remained the most stable due to the limited supply of new buildings, the vacancy rate in the GBD is forecast to increase, resulting from accelerated relocation of game & IT companies. In the last quarter of 2012, the YBD vacancy rate peaked to its highest level in history due to completion of two landmark towers of IFC 2 & 3. Although face rents in YBD's grade A office market edged up because of newly-completed prime buildings and the inflation rate, effective rents are expected to continue its weakening trend in 2013.”
He adds “The YBD will continue to have new office stocks. The Federation of Korean Industries Hall (FKI), with 168,681 sqm of gross floor area, will be supplied in the fourth quarter of 2013. Although the government is determined to create a financial hub for Asia in the area, the rise in vacancy rate seems inevitable for the time being.”