Prague Drops Down The Office Space Ranking

20 Feb, 2006, Prague

Office rents are growing worldwide, in Prague they remain stable
After many years, second place changes hands - Asia is snapping at Europe's heels
Prague's competitiveness in comparison with other Central European metropolises is growing

Nearly 1,640 euros per year is the cost of occupying one square metre of office space in London's prestigious Mayfair district. The second most expensive office location in the world is Hong Kong, where rents have almost doubled since last year. These are among the findings of this year's edition of Office Space Across the World, annually published by the leading global real estate consultancy Cushman & Wakefield.

"Prices of prestigious office space have been constantly growing worldwide. This is most pronounced in the case of Asian business centres - they now occupy two out of the top three places, pushing Paris into fourth. And this is despite the fact that rents in Paris have again increased," says Andrew Thompson, Partner and Head of Office Leasing team in Cushman & Wakefield Healey & Baker Prague (C&W/H&B).

"Asia is undergoing a period of colossal boom. Whereas in Europe rental rises have been in the order of a few per cent, in Asian metropolises they have gone up by tens of per cent. In Hong Kong, for instance, rents have nearly doubled, from 637 euros per sq m per year in 2004 to 1,200 euros in 2005. Thus, the gap between first and second place in the ranking has significantly narrowed too. Price growth has been underpinned by the immense shift of business activities to Asia, mainly in the service sector," explains Andrew Thompson.

Third place has been taken by Tokyo (1,170 euros per sq m per year), with Paris (1,009 euros per sq m per year) ranked fourth and Moscow (748 euros per sq m per year) fifth.

Rents in the centre of Prague remained unchanged in comparison with the year before, at 270 euros per sq m per year (this is the highest achievable rent). Hence, owing to worldwide rental rises, as well as the inclusion of new locations in the ranking, Prague has slipped from 34^th to 37^th place.

"The decline in the ranking also has its positive aspects. It means that although rents have been rising worldwide, they are stable here and therefore more advantageous for tenants. Office rents play an important role in the decision-making of international companies regarding transfer or expansion of their activities to new locations," says Karel Zeman, Head of Research at C&W/H&B.

"Relatively cheap office space means a competitive advantage for the Czech Republic. This applies on both the global and Central European scale. Poland, Hungary, and even Romania, are today more expensive destinations than the Czech Republic. As a result, we can be successful in attracting leading global companies with requirements for office space lease. It is positive news not only for developers and the building industry, but also for potential future employees of these foreign companies," Thompson explains.

For this year, experts from Cushman & Wakefield's Prague branch expect rents to be stable, with a slight growth being possible in the centre of Prague where the supply of office space is extremely limited. Meanwhile, we are witnessing the continued growth of office markets in locations outside Prague in other Czech cities.

Office Space Across the World compares office occupancy costs in 215 key locations based in 54 countries around the world. The published ranking states rents (including service charges) in the world's 54 most expensive locations. Global rents have recorded an average rise of 4.3 per cent, increasing fastest in the Asia Pacific region (15.6 per cent).

"Three European cities - Barcelona, Bratislava and Seville - have advanced into the top ten locations in which rents grew the fastest last year. In Bratislava, rents rose 25 per cent from 199 euros per sq m per year in 2004 to 240 euros last year. This is proof of an expanding Slovak real estate market. A mere two years ago, Bratislava did not make it into the ranking at all," Zeman points out. Nearly 1,640 euros per year is the cost of occupying one square metre of office space in London's prestigious Mayfair district. The second most expensive office location in the world is Hong Kong, where rents have almost doubled since last year. These are among the findings of this year's edition of Office Space Across the World, annually published by the leading global real estate consultancy Cushman & Wakefield.

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