After recording the largest rental declines in 2009, Asia saw a sharp bounce-back in values in 2010 with rents in Hong Kong rising by 51%, Cushman & Wakefield’s Office Space Across the World report shows.
There was a huge rental boost in Brazil, reflecting the fast recovery of its economy. Rio de Janeiro knocked New York off the top spot in the Americas, the first South American location to do so. In London, rents were up by 27% in the West End and 25% in the City, the highest annual rises in Europe in 2010.
South America showed the strongest regional rental performance last year, recording rental growth of 12% in stark contrast to North America where rents were at best stable. Brazil saw a rental rise of over 25% and accounted for two of the three most expensive locations within the Americas region. Rio de Janeiro saw a 47% annual rental increase, and São Paulo a rise of 4%.
Both Chile and Venezuela saw steady rises in rent, moving up by 8% and 13% respectively. Argentina was the only South America location to see rental values fall in 2010, though they remain at historic high levels.
‘The rise of rents in Rio de Janeiro’s office market results from very high demand and a lack of supply in the city. The quality of the new stock being delivered is speeding up rental growth,’ said Mariana Mokayad Hanania, manager for research services at Cushman & Wakefield South America.
The US overall saw a slight decline of 2% over the year with occupier sentiment remaining largely subdued in most cities. However, rents in the prime midtown New York submarket jumped by 10% as the city emerged from recession faster than the rest of the country.
Rental levels in Hong Kong soared by 51% in 2010, driven by strong demand on the back of a rising number of corporate expansions and new businesses and limited availability of grade-A office space. It was a similar situation in the Beijing office market where a surge in rental rates was underpinned by the lowest vacancy rate in the last decade.
In contrast to the prevailing regional trend, rents in Tokyo fell by 11% though it kept its position as the third most expensive location in the world. The city remained a tenant’s market with vacancy rates rising and average rents decreasing.
'We are now seeing the sustained presence of Asian locations in the upper reaches of our ranking. Tokyo and Hong Kong are now firmly established as some of the most expensive office locations globally, and three of our top six locations in our ranking are from the Asia region,’ said Barrie David of the Cushman & Wakefield Research Group.
‘This is in contrast to 10 to 15 years ago, where the most expensive cities were generally found in Western Europe and North America and highlights the recent growth and development within an increasing number of Asian markets over the last few years,’ he added.
In Europe, the picture was largely stable with a slight rental increase of 1%, though there were specific locations of notable growth. These included London, where there was a 25% uplift in rents in the City sub-market and a 27% rise in the West End. Milan saw a 10% uplift and Paris a 9% increase.
‘Milan's historical CBD has witnessed a 10% rental growth over the last 12 months, almost returning to the peak levels seen in early 2008. This growth has been driven by an increase in demand, mainly from banks rationalizing their front office requirements as well as growth in the legal sector, and the scarcity of newly refurbished grade A office space that is currently available,’ said James Meikle, head of Office Space Milan at Cushman & Wakefield Italy.
