London’s West End is likely to remain the second most-expensive office location in the world until at least 2015, a report from DTZ reveals today.
DTZ’s annual Global Occupancy Costs: Offices survey reveals that total occupancy cost per workstation in the West End at the end of 2010 was $20,160 (£12,368). DTZ expects this to increase by 5.1% pa to reach $25,890 by 2015.
The most expensive office space in the world was in Hong Kong, where cost per workstation was $22,330. This was expected to top $31,000 by 2015, driven by strong occupier demand and tight supply.
Average occupancy cost per workstation increased by 4% in local currency terms in the UK last year, although results from across the country showed a divergence in fortunes between the regions and London. Manchester and Leeds saw costs fall by 5% and 3% respectively. London, in contrast, recorded a 21% increase in costs in the City and a 9% hike in the West End.
DTZ said that the substantial rises in the capital were owing to a combination of rental growth caused by a decreasing supply of quality space and rising property taxes.
Although the London office market looks set to perform well over the coming four years, DTZ said that growth would be lower across Europe than will be seen globally. It said that occupancy costs would remain 11.7% lower than the 2007 peak by 2015.
Magali Marton, head of EMEA research at DTZ, said: “We expect increasing occupancy costs across Europe to be driven by rising rents, but rental growth is underpinned by varying factors. The rebound in global production and consumer spending is driving rental growth in eastern European office markets. In London’s West End and Paris’s CBD, recovering demand, combined with supply constraints following reduced development activity during the recession, is pushing up rents.”
samantha.mcclary@estatesgazette.com
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