Tokyo is the world's most expensive office location; Prague is the most expensive in Central Europe
25 Feb, 2010, Bratislava
Prime offices in central Prague can be rented at eight percent less than a year ago, says the latest issue of Office Space Across the World, Cushman & Wakefield’s annual report. Tenants pay EUR 404 a year per square meter. The amount includes rent, service charges, and other costs.*
“Prague city centre is the market segment that has been hit the most by the recession over the last two years. Several tenants have left the city centre in pursuit of cost-cutting strategies, effectively increasing the otherwise rather limited supply of office space in the city’s centre. The relocating companies tended to seek lower-cost locations. The increased supply combined with the lower demand has logically led to a decrease in rent”, says Radka Novak, head of Office Agency at Cushman & Wakefield Prague.
The top three positions in the chart were taken by the same cities as last year, only their order is different. The most expensive offices currently are in Tokyo– EUR 1,441/sqm per year (EUR 1,649/sqm/year in 2008) followed by Londonwith EUR 1,220/sqm/year (EUR 1,403/sqm/year a year ago). Last year’s No. 1 Hong Kong dropped to third position with EUR 1,207/sqm/year (EUR 1,743/sqm/year in 2008).
The world’s top office markets suffered an unprecedented fall in demand for office space. A steep and widespread fall in demand occurred in every region with prime rents falling for the first time in recent history.
“Rental expenses in Europe dropped on average by 11 percent. Ukraine and Ireland were the biggest fallers with a drop of 52% and 38% respectively. In London, which was the clear leader in the most expensive office chart in previous years, the costs of an office lease have been reduced by one quarter over the last year”, says Radka Novak.
Prime office rents are a key benchmark on which the strength of the office market sector is measured. Although developers were generally quick to respond to the global crisis and postponed the development of new buildings, the supply of office space available globally increased as corporations, seeking to reduce costs, vacated or sub-let excess office accommodation.
“Space offered for sub-letting accounts for a major part of the supply in the Czech Republic as well, at about 45 000 sq m as of the end of last year. So far, though, the demand for such sub-let premises has been very low, although very low rents can be secured and almost no initial cost of equipment is necessary. A great majority of companies see a high risk in subleases and prefer direct lease agreements even at the expense of higher costs”, says Radka Novak.
“Subleased space is always of a specific size and cannot be divided easily, so the flexibility of the size of the space plays a role. This is why experienced landlords tend to reach an agreement with occupiers and enable a reduction of the space for compensation from the existing occupier”, adds Radka Novak.
The outlook for this year is however slightly more positive. As some major economies return to growth, demand for office space from corporations is likely to once again increase. Rental growth is already being recorded in some of the world’s leading office markets such as the City of London and Paris CBD. In general, rents are expected to reach their low point by the middle of the year. The second half of the year will therefore be one of recovery and cautious optimism from both landlords and occupiers.
The world’s most expensive office locations 2010
(Source: Cushman & Wakefield)
* The position in the World’s Most Expensive Office Locations Chart is based on the markets with the highest cost of office rental in the various countries. According to the British methodology, the rent, operating cost, and charges are calculated on the basis of the net usable area, i.e. based on different rules than those customary in the Czech Republic. Based on the British method, this value reached € 404/sqm/year (as stated in the press release), but this price includes, aside from the rent derived from the net usable area, also all service charges and taxes, primarily for the sake of international comparability. Based on the practice customary in the Czech Republic, the average amount of office rent in downtown Prague reached € 264 sqm/year in 2009.
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