Britain is in something of a complicated place on the world business map at present. First of all, the economic situation is causing the value of the pound to fluctuate on almost a daily basis, making the UK a gamble for international investors. The United States has recovered admirably from the global financial crisis, and developing markets in South America, such as Brazil and Colombia, have pushed Britain yet further from the positions of power in the business world.
However, Europe remains a force to be reckoned with and no business wants to cut their losses when it comes to this lucrative market. And, with the Euro dragging down traditional powerhouses like Germany and France, the UK has now become the safest foothold for those wishing to keep their options open with regards to the continent.
Perhaps this is the reason why the West End of London has regained its position as the most expensive office market in the world for the first time since the economic difficulties began in 2008.
In a study released by commercial estate agent Cushman & Wakefield, it was revealed that the low availability of office space in London has caused a 2 per cent increase in rents compared to this time last year. Prime office space in the area can now cost up to $262, or £169, per square foot annually, with this charge including rent, property taxes and service charges.
Meanwhile, Hong Kong has slipped to second place, with costs there coming in at around $184 per square foot per annum.
Surprisingly, the Zona Sul area of the city caused Rio de Janeiro in Brazil to rocket up the table from eighth to third place in only one year. Tenants can now expect to pay an annual cost of $165 per square metre – an increase of 43 per cent when compared to this time last year.
Head of London markets at Cushman & Wakefield, Digby Flower, believes that the high demand for quality commercial property in the capital city has, and will continue to, push rents up.
He says; “As a truly global city, London’s appeal continues unabated. In conjunction with a scarcity of good quality stock prime rents have increased over the year.
“Equally importantly, we expect rents to grown further as we get into recovery mode.”
While the West End’s jump in rental prices has put it at the top of the table, it failed to match the global average prime rent increase of 3 per cent since last year. This has largely been down to a leap in demand from South American markets, primarily Brazil and Colombia as the figures emerging from Rio de Janeiro can attest to.
Unfortunately, the success of South America was not emulated in the EMEA region – Europe, the Middle East and Africa – with London being a stand out exception to the rule. Business confidence has been sorely knocked by the on-going Eurozone Crisis, meaning that rents across the region have remained resoundingly flat on the whole.
In the report, Cushman & Wakefield warned that the decrease in business confidence is likely to have a strong effect upon the commercial property market.
It said; “Although prime rents expanded on a global basis, many markets suffered under continuing economic uncertainty and this led to increased occupier caution.
“We expect the trend of companies proactively trying to reduce office occupancy costs to continue as the overall global economic outlook remains unsure.”
Why do you think the West End has become so popular for foreign investors – is it the wealth of amenities and proximity to the city centre, or is it simply fashionable to base businesses there? Which other UK cities do you believe will begin to attract foreign investors once space in London becomes all but impossible to obtain – will the Airport City plans in Manchester manage to steal the focus away from London?
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