London retains its No 1 position, with Paris in second place and Tokyo in third; Hong Kong
is biggest riser
The cost of occupying prime office space in Budapest represents only 18% of the total cost of
renting space in Mayfair in London's West End, according to this year's edition of Business
Space Across the World (BSATW) by Cushman & Wakefield Healey & Baker (C&W/H&B),
the European division of global real estate firm Cushman & Wakefield.
Budapest also offers value for money in a regional sense: total occupancy costs in premium
office buildings in Budapest's Central Business District were €287/sqm/year, including rents,
property taxes and service charges. This is cheaper than Vienna (at €336/sqm/year) and Warsaw
(at €325/sqm/year), but more expensive than its main Central European rival Prague, where
occupancy costs in 2004 were €270/sqm/year.
Ward Stocker, the Partner heading up Office Agency at Cushman & Wakefield Healey &
Baker in Budapest said: "This proves that as well as having some of the best quality
office buildings in the region, Budapest is also offers the best value for money in terms of
occupancy costs. Stubbornly high vacancy levels are now falling thanks to increased interest
from occupiers, many of whom are looking to either expand in Hungary or enter Central Europe
for the first time. This, coupled with a steady increase of new class A buildings coming on to
the market, means we are likely to see rental values in Budapest staying stable over the next
few years, with potentially more of a marked difference between CBD and non-central rental
In the ranking, London retains its No. 1 position, with Paris in second place. The cost of
occupying one square metre of office space in London’s Mayfair district is €1,571 a year,
compared with €945 in Paris' central business district, the 8th arrondissement – a gap of 66
percentage points, which puts London well into the lead.
Hong Kong is the world's biggest riser, climbing 12 places to take the No. 5 slot. The cost of
occupying one square metre of prime office space in the Central District of the Chinese city
reached the equivalent of €637 a year, a rise of 109%.
Michael Thompson, Cushman & Wakefield's Chief Executive Officer in Asia Pacific, comments:
"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. But we must remember 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 world's 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 year's 50 per cent.
"The report shows that the revival of the world's 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, C&W/H&B's Head of
Business Space Research. "Further evidence is also emerging of a 'dual' market, as
secondary properties, which don’t match the needs of the modern office occupier, look set to
remain in oversupply for some time"
New York's Midtown district in Manhattan retains its position at No 4. Office rents have risen
year on year and with vacancy rates approaching 10 per cent in 2005, the Midtown market is
expected to perform even better this year, driven by the banking and financial sectors.
About the overall affect of 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 world's
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
|Regional increases in office rents in local
|Average Rental Growth %
||Year to Dec 2004
|Africa & the Middle East
|Central & Eastern Europe
|US & Canada
|Latin America, including Mexico