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Hong Kong now world’s most expensive for office property

The cost of occupying a prime square meter of office per year in Hong Kong now stands at €1,743, the Office Space Across the World 2009 report from global real estate advisor Cushman & Wakefield shows.

Although rents in Hong Kong actually fell 4% in 2008, the much larger 23% fall in London's West End pushed occupancy costs down further to €1,403/m²/year. The cost of space in Tokyo now stands at €1,649/m²/year, a fall of 19% in 2008.

Of the 202 key locations in 57 countries around the world that are compared in the report, 58% showed rental growth in 2008, 26% saw stable rents and 16% showed a rental fall, compared with only 1% in 2007.

Office rents globally rose on average by 3%, significantly below the 14% achieved in 2007 and the lowest growth rate since 2004.

South America was the best performing region with rental growth averaging 12% for the year. Western Europe was the poorest performing region with average rental growth of only 1%.

The impact of the global economic downturn has been felt in all markets although some were better placed to withstand declining occupier demand for space, the report says. The expansion of financial institutions, particularly the hedge funds, had driven up rents in London's most prestigious West End market for the last few years but it has now felt the full impact of the credit and banking crisis.

The fall in rents and the weak UK currency, however, means that for overseas companies, London is now more affordable than it has been in years.

Dublin has fallen out of the top 10 for the first time in three years. It is down to 15th position from ninth. Dubai, however, has risen from eighth to fifth place with rents increasing by 7%. Damascus in Syria is a new entry for 2009 at number eight.

There are also signs of improvement in the Chinese commercial property market. 'The success of the China market is mainly due to strong demand over the first half of 2008. This slowed quickly in the second half as development plans were delayed. However, many have since resumed construction,' said Richard Middleton, Executive Managing Director, Cushman & Wakefield Greater China.

'Recent reports show a re-emergence of tenant demand, particularly in the pharmaceutical, education and legal sectors, as occupiers reassess their space requirements,' he revealed.

James Young, Head of Central London offices, Cushman & Wakefield, said that whilst 2008 was not a great year for London's commercial property market, the fall in rental values and weakening of sterling have meant that the city has become better value and more competitive in the global rankings.

'We should not forget that London remains the number one location in Europe that international businesses choose to locate in. Its increasing cost competitiveness will only help this status,' he said.