The West End quarter in London has retained its position as the world's most expensive location for office space.
The tenants pay EUR 2,009 to lease one square metre a year. These facts follow from this year's edition of Business Space Across the World, a study looking at the world's most expensive locations for office space produced annually by Cushman & Wakefield, the world's leading real estate consultancy firm.
Tokyo (EUR 1,493 per m2/year) which overtook Hong Kong (EUR 1,448) placed second. In Paris, which placed forth this year (EUR 1,012), the office lease costs are 50% lower than in London. The Indian city of Mumbai which together with Dublin is the leaper of the year has jumped to 5th position. Both cities climbed six spots in the ranking.
The Czech Republic fell from 37th to 38th position. The highest prices for office lease in this country are paid in the centre of Prague - around EUR 276 per m2/year. "The drop by one spot was caused mainly by the growth in prices in the other locations in the world. The rent in Prague was stable last year and there was a decrease only in Brno," says Andrew Thompson, partner and manager of the office team in the Prague branch of Cushman & Wakefield.
"On the other hand, as a result of the undersupply, we feel pressure to push the prices up in selected Prague locations.
The other capital cities in the Central European region have noticed the moves on the market which led to the growth in rent," says Thompson.
The Business Space Across the World ranking compares the costs of lease in 211 key office locations in 51 countries of the world. The amounts ranked in the list express not only the rent but also the total costs connected with lease - i.e. including the fees for services, etc. The study results are based on the data of 2006.
Other European cities, such as Frankfurt, Amsterdam, Brussels or Budapest showed slight decrease in the ranking.
On the other hand, India is experiencing a dramatic growth in rent. Eight out of the ten locations that saw the highest price growth last year are in India. The rents have even doubled in several parts of Mumbai. "The financial sector is very attractive in Mumbai. A number of investment banks, such as Goldman Sachs, UBS or Credit Suisse First Boston as well as a number of private funds entered or expanded to this location last year. All of them leased first rate offices. This, along with the limited construction of new offices and a lack of free spaces has led to the huge growth in prices," says Sanjay Verma, managing director of Cushman & Wakefield in South Asia.
Warsaw jumped six spots upward from 33rd to 27th position. Last year, the tenants paid up to EUR 382 per m2/year.
Budapest, which is in 32nd place with EUR 339 per m2/year, is also more expensive than Prague. Cheaper in the Central European region is only Bratislava which placed 42nd with EUR 240 per m2/year. "The reason for the more expensive offices in Warsaw and Budapest is that the local property owners are quicker in recognizing the market mechanisms.
The percentage of non-leased spaces has been decreasing in the last twelve months throughout Europe. To make the market move it is necessary to look forward rather than backward. If the rent of the highest quality properties increases the entire market will respond. I've seen this on other markets," says Andrew Thompson and continues: "This, however, can be an advantage for the Czech Republic - due to the lower rents, it can be attractive for the world's leading firms with large demands for office lease." In the Czech Republic, there is a strengthening trend to move to the regions outside Prague. Brno slowly starts to be saturated and the investors start to look, in particular, at Ostrava.
There is also demand for Plzeň.
"The key drivers are the lower costs of human labour and lease, good transport availability, and the offer of talented workers in the capital cities of the regions. Both Brno and Ostrava are interesting alternatives for forwardlooking companies wishing to avoid the high demand for labour in Prague which logically leads to higher wages," says Pavel Skřivánek, C&W specialist in office rental in locations outside Prague.
