HONG KONG RANKS SECOND AS ASIA PACIFIC’S MOST EXPENSIVE OFFICE MARKET FOR THE SECOND YEAR

Hong Kong – 4 March 2015 – London’s West End is the world’s most expensive office market for the third consecutive year, retaining its title ahead of runner-up Hong Kong, according to research published today in Cushman & Wakefield’s annual Office Space Across the World global ranking.

Global office rents rose 7% in 2014, more than double the circa 3% annual compound increase since 2010.  Prime rents in London’s West End have risen 4.6% over the year but are still 13% behind the 2007 peak.  However, further positive rental growth is anticipated against a backdrop of limited supply and expected development completions in 2015.

Cushman & Wakefield’s head of London markets, George Roberts, said: “With a true global appeal, London continues to attract major international businesses looking to be based there, often using it as a springboard into Europe.  As economic conditions in the UK further outperform, there will be heightened demand for London office space in 2015 from across all sectors.  With supply heading downwards, further rental growth is expected.”

  Source: Cushman & Wakefield

Beyond Hong Kong’s second position in the global ranking, New Delhi’s Connaught Place is the next highest placed district in Asia Pacific, followed by Tokyo in third.  Beijing maintains a solid fourth place in the regional ranking.  Manila recorded the largest increase in occupancy costs in the Asia Pacific region with strong growth in outsourcing and offshoring services expected to sustain office demand going forward.

The majority of core markets are seeing vacancy rates below 7% and will therefore be able to sustain some new development as well as maintain rental values. There are however a few exceptions to this: namely certain second tier Chinese cities and key Australian cities where existing supply plus new construction will put pressure on rental growth.

John Siu, managing director of Cushman & Wakefield in Hong Kong, said: “Leasing activity across Asia Pacific continues to strengthen but to a varying degree. With pent-up demand in some of the core locations and service sector growth positive, 2015 is expected to see further rental growth in most of the gateway cities of the region.”

The region’s office leasing markets is expected to remain healthy in 2015, where net absorption is expected to soar to a seven-year high. The bulk of the activity would be in the emerging markets where about 70% of the region’s new supply is concentrated.

Low single-digit rent growth is expected across the top 30 cities tracked in the region for 2015. For core markets, Grade A rents are forecasted to rise another 1.0-2.0% per annum through 2015 while those in the emerging markets are forecasted to increase moderately, at 0.5-1.0%.

“Among the core markets, 2015 will likely be a watershed year for Tokyo as core CBD rents in the capital are expected to finally seal in a recovery to register another year of sustained growth. Rents in Hong Kong’s CBD and Singapore are also expected to increase as prime supply tightens”, said Sigrid Zialcita, Managing Director of Research for Asia Pacific, Cushman & Wakefield. “While supply pressures are likely to restrain rentals in some markets, we believe Sydney would continue to gain momentum as government policy support growth and sustain positive sentiments”.