international analysis
Weakening demand causes
worldwide fall in office prices
Dubai moves up global ranking of most expensive office destinations
A worldwide drop in demand for office space has caused every region to record falling prime rents, according to a recent report. Cushman & Wakefield’s ‘Office Space Across
the World’ report highlighted how the world’s most expensive office locations have changed since last year. Dubai, the Middle East’s most expensive city, has risen one place to fourth position while Tokyo is now the world’s most costly destination, ahead of London’s West End and Hong Kong. Michael Atwell, head of Middle East operations
at Cushman & Wakefield, said: “Dubai’s position at number four in the table is impressive, however these figures relate only to the Dubai International Financial Centre (DIFC) and don’t reflect Dubai overall. DIFC has enjoyed strong demand and high rental levels because it is viewed as a prime location for regional headquar- ters and a key financial hub. “However, elsewhere in the city we have seen
a significant rental decline of up to 50 percent with vacancy levels currently running at around 20 percent – this is predominantly due to oversupply of commer- cial office space following the development boom of the last few years. “Despite this, Dubai is still seen as a positive and
dynamic place to do business, and acts for many international companies as a platform from which to extend their reach further into North Africa, India and South-East Asia.”
RISERS AND FALLERS
Cushman & Wakefield’s report stated that prime office rents are a ‘benchmark on which the strength of the world’s office and development sector is measured’. It added: ‘The global economic crisis, collapse and contraction of financial institutions and subsequent uncertainty across the wider business world meant demand for new office space fell significantly.
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/apr-may 2010
‘Although developers were generally quick to respond
to the crisis and postponed the development of new buildings, the supply of office space available to lease still increased as corporates – seeking to reduce costs – vacated or sub-let excess office accommodation.’ The largest prime office rental falls included all the
of major Asia Pacific cities with Singapore, Hong Kong and Tokyo recording falls of 45 percent, 35 percent, and 21 percent respectively. Ho Chi Minh City, Viet- nam, saw the largest rental compression with a fall of 53 percent. Kyiv, Ukraine recorded a heavy fall of more than 50
percent, Dublin fell by 35 percent and London fell by 24 percent. In the Americas, rents declined overall by seven percent in 2009. South America was more resil- ient that North America, with Santiago, Chile, bucking the trend with an increase of 28 percent, although the market is small and characterised by a limited
supply of Grade A office space. Small rises were also recorded in cities such as Jakarta, Indonesia, Miami and Cape Town, where the latter’s hosting of the 2010 World Cup has fuelled short-term demand. Globally, the biggest risers in the ranking were Rio de Janeiro, moving from 23rd South Korea rising from 27th Australia rising from 29th
to 13th to 15th
. The top three most expensive cities were the same
as 2009, albeit in a different order. Pole position was occupied by Tokyo (US$190 per square foot per year) up from third last year, followed by London (US$161 per square foot per year) which climbed from third to second place, and Hong Kong (US$160 per square foot per year) which fell from first to third position. The remaining top ten cities were Mumbai, New
York (Midtown) Moscow (which dropped from fourth to seventh), Paris, Milan and Zurich.
to 14th
position; Seoul, ; and Sydney,
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