According to commercial real estate brokers Cushman & Wakefield, the world’s leading cities have suffered a record fall in demand for office space, contributing to the first total global drop in prime office rents in seven years.
The Cushman & Wakefield report, Office Space Across the World, found that in 2009 there were steep falls recorded in office demand in every region across the globe. “Prime office rents are a key benchmark on which the strength of the world’s office and development sector is measured,” the report says.
“The global economic crisis, collapse and contraction of financial institutions, and subsequent uncertainty across the wider business world, meant demand for new office space fell significantly.”
The report states, however, that 2010 could be more positive. With many major economies starting to bounce out of recession, the demand for office space for companies looks likely to increase.
In places such as the City of London and Oslo, office rents are on the increase and though rents are expected to hit their low point in the middle of the year, the second half of 2010 looks set for recovery.
The largest prime office real estate falls were recorded in the Asia-Pacific region; Vietnam’s Ho Chi Minh City recorded the greatest fall of 53%, while Singapore (-45%) Hong Kong (-35%) and Tokyo (-21%) also recorded falls.
In Europe, Kyiv (-50%) and Dublin (-38%) saw the greatest dips, while usually buoyant markets such as London’s West End (-25%) and Warsaw (-24%) both saw declines.
In the Americas the overall rents fell by 7% last year with Boston (-26%), San Francisco (-24%), Seattle (-23%) and New York (-23%) seeing the biggest downturns. South America did not suffer as greatly with Santiago even seeing an increase of 28% in rental prices.
The report also ranked the most expensive cities in terms of office rentals; Tokyo remained the most expensive while London and Hong Kong swapped places, with the UK capital now the second most expensive city to rent space.
Rio de Janeiro moved from 23rd to 13th place, while Seoul moved from 27th to 14th and Sydney from 29th to 15th. In terms of the overall global real estate investment landscape, volumes fell by 23% in 2009 to $364bn, which was the biggest fall since 2003. However, global investment volumes are expected to rise to 30% in 2010.