Tokyo is most expensive office location

A new ranking of the world¡¯s top office districts put the cost of opening an office in Tokyo at €1,441 per square metre per year

Tokyo has become the world¡¯s most expensive office location even as a fall in demand for office space has caused the first global drop in rents since 2003.

A new ranking of the world¡¯s top office districts put the cost of opening an office in Japan¡¯s main business district at €1,441 ($1,960, £1,265) per square metre per year. It replaces Hong Kong, where costs have fallen to €1,207 sq m per year, now less than London¡¯s West End.

Global offices markets have all suffered an unprecedented fall in demand, according to Cushman & Wakefield, the real estate adviser.

Every region recorded falling rents in 2009 for the first time. Most developers were quick to respond to the economic crisis by shelving new building work, although the supply of offices still increased as corporate occupiers sought to cut costs by vacating or sub-letting space.

The largest rental falls came in Singapore, Hong Kong and Tokyo, where office rents fell 45 per cent, 35 per cent and 21 per cent, respectively. Ho Chi Minh City was the worst hit, with a rent decline of more than half.

Rents globally are expected to reach their low point by the middle of the year, according to Cushman & Wakefield, which added that the outlook for 2010 was more positive.

John Siu, general manager for Cushman & Wakefield in Hong Kong, said: ¡°Demand for office space in Hong Kong¡¯s key business districts started to pick up towards the end of 2009. We see 2010 as a year for tenants to take advantage of the rare vacancies and significantly discounted rents before the market rebounds.¡±

It expects demand for offices will again increase to reduce the supply of space as some big economies return to growth. Rental increases are already being recorded in markets such as the City of London and Oslo.

Kiev and Dublin were the hardest hit in Europe, with 50 per cent and 38 per cent wiped off the value of prime office rents by year end.

Rents declined 7 per cent across the US but South American markets were more stable.

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