Office rents in skyscrapers in London are highest in Europe despite Brexit
Office rents in London’s skyscrapers are the highest in Europe as companies continue to pay a premium for space in the city’s tallest buildings despite Brexit uncertainty.
The report, which examines the rental performance of commercial buildings over 30 storeys, shows that prime rents in London’s skyscrapers remained at US $110 per square foot in the first half of 2017.
This is approximately double the rents of tall buildings in Paris at $58 per square foot and Frankfurt at $54 per square foot, according to the Global Cities 2018 report from international real estate firm Knight Frank. Indeed, London is the only European city to make the global top 10 in the ranking.
Hong Kong’s skyscrapers continue to command, by some margin, the highest rents in the world at $304 per square foot, followed by New York and Tokyo at $162 per square foot and $140 respectively. San Francisco, where rents have risen to $117 per square foot completes the top five, ahead of London.
Knight Frank’s analysis shows Toronto’s skyscrapers are experiencing the highest rental growth, rising 11.9% in the first half of the year to $58 per square foot. Rental growth was also evident in North American cities with New York up 1.8%, San Francisco up 3.5% and Chicago up 1.6%. The report says that the recovering US economy and low unemployment rate have translated into increased business confidence and demand for space in trophy buildings.
However, not all cities have seen growth. While rents were flat in London in the first half of the year, they also failed to move in Tokyo, Boston, Frankfurt, Dubai, Taipei, Madrid, Manila and Seoul.
Skyscraper rents fell by 3.9% in Shanghai, by 2.2% in Los Angeles, by 0.9% in Singapore and by 0.8% in Kuala Lumpur which is bottom of the rankings table at $23 per square foot followed by Seoul at $30 per square foot and Manila at $33.
‘That London still commands the highest skyscraper office rents in Europe, despite the Brexit uncertainty, is a statement of its resilience and popularity as a business location. Firms are willing to pay more to be in London skyscrapers than those in Frankfurt because they view the UK capital as a more important international hub,’ said James Roberts, chief economist at Knight Frank.
‘However, since last year London has slipped from fourth to fifth place in this ranking, and if we keep seeing populist policies which make doing business in the UK more difficult, it is not impossible for London to slide further down the table. We need to be mindful during the move towards Brexit of the factors necessary to keep London a leading global business centre in the future,’ he added.
According to William Beardmore-Gray, global head of occupier services and commercial agency at Knight Frank, firms pay to be in skyscrapers for the wow factor, but it is no coincidence that the top five places in this ranking happen to be world’s leading business centres. ‘There are cities with far more famous and much taller skyscrapers than London or Hong Kong, that rank lower in the table,’ he said.
‘However, these figures are a wake-up call and show that demand for space, and rents, in London’s prestigious towers will only hold up if the city continues to be seen as a top five centre of international commerce,’ he pointed out.