This year has seen London’s West End leap above Hong Kong to regain its status as the most expensive office market in the world.
The cost of Grade A office space in the area has risen by almost 15 per cent during 2013, as the resurgence in the UK economy drives demand. Average rents have now reached £100 per sq ft placing the West End above Hong Kong for the first time since the onset of the financial crisis.
Beijing, Moscow, and New Delhi make up the top five in the table, according to research conducted by CBRE. The City of London is placed seventh between Tokyo and Paris. Rents in North America were found to be rising at the fastest rate while, in contrast, those in the Spanish and Italian markets suffered a year on year fall.
CBRE says a key factor in rising rents is a lack of high-quality, well-located office space. Strict planning rules in the West End limits new development, leaving a market largely consisting of period buildings with rents at the higher end of the scale.
“These rents are achieved in the absolute core West End areas such as Mayfair and St James, and apply to a very limited and specific range of addresses,” said CBRE’s Kevin McCauley.
The research reveals that West End rents are being pushed up by two main groups of tenants. These are financial and energy companies such as private equity groups and oil companies.
McCauley says that twelve months ago these types of businesses were unwilling to take-up high rental office space. The fact that they are doing so now reflects greater positivity, he explains.
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