Property markets in the world's leading cities suffer an unprecedented fall in demand as office rents fall

Property markets in the world's leading cities suffer an unprecedented fall in demand as office rents fall

  • Tokyo, Japan now the world's most expensive office location
  • London's West End moves from 3rd to 2nd
  • Hong Kong falls to 3rd
  • Vancouver rises 3 spots to 34

The world's leading centres have suffered an unprecedented fall in demand for office space which has contributed to the first aggregated global fall in prime office rents since 2003. Global real estate adviser Cushman & Wakefield, in its new Office Space Across the World report, says that 2009 recorded a steep and widespread fall in office demand with every region in the world recording falling prime rents for the first time.

The outlook for 2010 however is more positive. As some major economies return to growth, demand for office space from corporates is likely to once again increase and reduce the supply of space. Rental growth is already being recorded in some of the world's leading office markets such as the City of London and Paris CBD, and rents globally are expected to reach their low point by the middle of the year. The second half of 2010 will therefore be one of recovery and cautious optimism from both landlords and occupiers.

While Vancouver rose three positions in the global ranking, the market still saw a 26 % decrease in CBD rents in 2009, the largest decrease of any major Canadian market. Calgary and Toronto also saw rental rates fall substantially while Ottawa and Montreal, further from the influence of the US markets saw greater stability and only modest changes in rental rates.


Canadian Market Summary
Market District




in 2009

Vancouver CBD 31.38 -26%
Calgary CBD 29.61 -24%
Toronto CBD 19.94 -24%
Ottawa CBD 24.62 2%
Montreal CBD 19.62 3%

"Canada's major markets weathered the storm, though took on some water in 2009. Weak demand and rising vacancy rates forced rents down in three of our major markets," said Pierre Bergevin, President and CEO of Cushman & Wakefield in Canada. "Vancouver has since stabilized and rents are unlikely to drop much further. Ottawa and Montreal saw very little in the way of rate declines. Both markets remain tight with no new supply on the horizon. Both markets will experience some softening in rental rates over the first half of 2010 followed by greater stability in terms of demand and rental rates in the latter half of 2010."

Calgary and Toronto will continue to see softening rental rates particularly in older buildings with existing vacancy issues. While the vacancy issues in central Toronto have been driven by new development activity, Calgary has experiences a perfect storm of both a hot development cycle and significantly weaker gas prices, both of which have had a big impact on rental rates.

The largest prime office rental falls included all of the key cities of Asia Pacific with Singapore, Hong Kong and Tokyo recording falls of -45%, -35% and -21% respectively. Ho Chi Minh City, Vietnam saw the largest regional rental compression with a fall of -53% recorded.

In the Americas, rents overall declined by -7% during 2009. In the USA, Boston, San Francisco, Seattle and New York's Downturn recorded the biggest falls respectively at -26%, -24%, -23% and -23%. South America was more resilient with rents in Santiago, Chile bucking the trend and actually increasing 28% although the market is small and characterised by a limited supply of Grade A office space. Buenos Aires, Argentina recorded the biggest fall in South America at -14% whilst the region's largest economy, Brazil, recorded a fall of -8%.

Prime office rents are a key benchmark on which the strength of the world's office and development sector is measured. The global economic crisis, collapse and contraction of financial institutions and subsequent uncertainty across the wider business world meant demand for new office space fell significantly. Although developers were generally quick to respond to the crisis and postponed the development of new buildings, the supply of office space available to lease still increased as corporates, seeking to reduce costs, vacated or sub-let excess office accommodation.


In the ranking of the world's most expensive office locations, the three top locations remained constant with Tokyo moving into first place from second with full office occupancy costs (prime rents plus taxes and service charges), costing (euro)1,441 sq m per year/$190 sq.ft per year. London's West End moved from third to second place with full occupancy costs of (euro)1,220 sq m per year/$161 sq.ft per year and Hong Kong fell from first to third position with full occupancy costs of (euro)1,207 sq m per year/$160sq.ft per year.

The biggest risers in the ranking were Rio de Janeiro, Brazil moving from 23rd to 13th position with only a slight rental decline and appreciation of the Brazilian Real against the Euro, and Seoul, South Korea and Sydney, Australia rising respectively from 27th to 14th and 29th to 15th with prime rental rises.

The World's Most Expensive Office Locations 2010





City, Location Country

Occ. Cost


Occ. Cost


2 1 Tokyo, CBD Japan 1,441 190
3 2 London, West End UK 1,220 161
1 3 Hong Kong, CBD China 1,207 160
5 4 Dubai, CBD (DIFC) UAE 899 120
6 5 Mumbai, CBD India 809 107
8 6 New York, Midtown USA 786 105
4 7 Moscow, CBD Russia 768 102
7 8 Paris, CBD France 765 102
10 9 Milan, CBD Italy 667 89
11 10 Zurich, CBD Switzerland 660 88

                       (Source: Cushman & Wakefield)
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on February 28, 2010