London's West End district retains its title as the world's most expensive office location in this year's edition of Office Space Across the World, a global report on office occupancy costs produced by real estate services firm Cushman & Wakefield.
One square metre of prime office space in London's West End costs €2,009 a year for companies to occupy. This is 35% higher than the occupancy costs in Tokyo, at €1,493, which this year has overtaken Hong Kong (€1,448) to take second place.
Office Space Across the World compares office occupancy costs in 211 key locations in 51 countries around the world. Of those locations, 94% recorded positive or stable annual growth and only a mere 6% experienced a decline in rents.
Elaine Rossall, the report's author and Head of Business Space Research & Consultancy for Cushman & Wakefield in EMEA, says: "We have seen the fastest level of growth in occupancy costs in many of the world's top office locations since the upward turn of the property cycle in 2001. The driving force in most markets has been the financial services sector, which is in a buoyant mood given stock-market recovery, record levels of mergers and acquisitions, and more sophisticated global financial markets."
Regarding the No. 1 position of London's West End, Guy Taylor, Cushman & Wakefield's head of West End Office Agency, comments: "This prime district of London attracts companies seeking top-quality, showcase-style space that meets the demands of today's occupier they want the best and will pay the best."
The Indian city of Mumbai is the joint biggest riser in the ranking, together with Dublin. Mumbai goes up six places to 5th, with annual occupancy costs at €981 per m².
Sanjay Verma, Executive Managing Director, South Asia, Cushman & Wakefield, comments about the rise of Mumbai: "The financial services sector continues to be very active in Mumbai. Last year saw the entry and expansion of several major investment banks, including Goldman Sachs, UBS and Credit Suisse First Boston, as well as a host of private equity funds, leading to the rapid take-up of prime office space in south and central Mumbai. This strong demand, along with the lack of new development and the low vacancy rates, has resulted in the significant escalation of rents."
The Irish capital of Dublin goes up six places to reach the No 6 position, with occupancy costs at €823 in the prime central districts of Dublin 2 and Dublin 4, both south of the river Liffey. With office take-up at a record high, rents went up by 43% last year.
James Nugent, Director, Office Agency of Lisney, Cushman & Wakefield's Alliance Partner in Ireland, says: "Growth is being pushed by a buoyant economy and increased demand for office space, in particular from the financial services sector, which employs 50% more people in the city than it did ten years ago."
The strong growth by Dublin and Mumbai pushes down Midtown New York two places to 9th position. This is despite rents increasing 28% in US dollar terms last year, as the office vacancy rate dipped below 7% for the first time since the summer of 2001, before the attack on the World Trade Center.
In terms of rental increases last year, the major component of office occupancy costs, the biggest rise in local currency terms was in Abu Dhabi in the United Arab Emirates, with rents going up 200%. Elaine Rossall of C&W says: "Almost no space is currently available in the city as companies expand on the back of the current economic boom in the region."
India accounts for eight of the top ten locations in terms of rental growth. Fastest growth is seen in Mumbai's central district of Worli (which also has the highest occupancy costs in Mumbai) and the Bandra Kurla Complex, in Mumbai's suburbs. These two locations have seen rents increase 107% and 93% respectively. Sanjay Verma of C&W continues: "The new quality specifications of office developments in Worli and Bandra Kurla Complex have outshone the office space in Mumbai's central business district. This