Business Space recovery in London's Mayfair

24 Jan, 2005, London

Mayfair has consolidated its position at the head of the rankings with 2004s rise of 23 per cent bucking the trend in Western Europe and demonstrating that recovery in the capitals commercial property market is now well under way. Pariss 8th Arrondissement was the second most expensive in the ranking with an occupancy cost of 945 per square metre per annum, a marginal fall of almost 1 per cent for the year.

Guy Taylor, Cushman & Wakefields head of West End agency, said: In terms of rental growth, Mayfair was the best performing business district in Western Europe in 2004. Financial companies and major corporates in particular have sought to locate or expand their operations within Mayfair in part because of the prestigious address but also because of the critical mass of similar financial organisations already based there. 2005 should see rents increase still further with the City and Docklands markets also showing growth.

In Asia, the cost of office accommodation in Hong Kong has risen by 109 per cent in 2004 buoyed by demand from Western corporations who are scrambling to exploit the economic potential of the worlds most populace country using the former British colony as an entry point. As a result, Hong Kong has leapfrogged from 12 to number five in the ranking with an occupancy cost of 637.

The centre of Tokyo and the Midtown district of New York make up positions number three and four in the rankings at 723 and 680 respectively. Rents in Midtown New York have risen by almost 2 per cent whilst in Tokyo they have remained flat.

Michael Thompson, Cushman & Wakefields chief executive officer in Asia Pacific, said: Banks and other financial institutions have been particularly active in the Hong Kong market, taking the opportunity of historically low rents to upgrade to better-quality office space. We must remember, however, that Hong Kong is traditionally a volatile market, and rents are still 42 per cent below their 1997 peak. For 2005, we forecast that rental prices will continue to grow, but at a slower rate.

The 2005 edition of Business Space Across the World ranks the most expensive locations for occupying office space in 47 of the worlds leading countries. In the year to December 2004, office rents increased or were stable in local currency terms in two-thirds of the 210 locations monitored, compared with last years 50 per cent.

The report shows that the revival of the worlds economies is finally filtering through to the top-end of the office real estate sector, with increased demand for modern space in the right location driving up occupancy costs, says Elaine Rossall, Cushman & Wakefields head of business space research. Further evidence is also emerging of a dual market, as secondary properties, which dont match the needs of the modern office occupier, look set to remain in oversupply for some time.

On overall business sentiment on office occupancy decisions, Elaine Rossall comments: The view out there is one of optimistic caution. The business confidence shown by the financial sectors and certain professional services is yet to be mirrored to the same extent by multinational corporates; a sense of uncertainty still pervades whether over the price of oil, the weakness of the US dollar or a stalling in export demand.

Looking ahead, Elaine Rossall says: The cost of occupying top-quality office space in the worlds key locations will continue to rise this year as a shortage of prime office space is coupled with a steady increase in demand. Much of this demand is being fuelled by forward-looking occupiers looking to cut costs and increase productivity through changing or upgrading their office space.

For a copy of the summary report and ranking of the top 47 cities, please contact Chris Bond on 020 7152 5006 / 07793 808 8006 / chris.bond@eur.cushwake.com

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