Tokyo replaced Hong Kong as the world’s most expensive office location, after rent in the capital declined at a slower pace, according to a report released Tuesday by broker Cushman & Wakefield Inc.
Rent for prime office buildings in Tokyo fell 21 percent to around ¥180,000 a square meter last year, the broker said in an e-mailed report. The cost of leasing offices in Hong Kong, which slipped two places in the rankings to third, dropped by 35 percent after more tenants moved away from the city center.
London’s West End was the second most expensive district.
“As Japan’s economy is picking up, the Tokyo office market is showing resistance to further decline,” said Hideyuki Shinkai, a fund manager for Norinchukin Trust & Banking Co. “The stable supply of new space also has been supporting Tokyo’s office market. Compared with the Tokyo market, the Hong Kong office market has been traditionally volatile and it had been rising rapidly.”
The global recession prompted companies to lease less space, causing rents to slump across the main business districts last year, the broker said.
The last worldwide decline in prime rents happened in 2003, according to the report. Companies also switched to cheaper premises and leased their excess space to other firms, hurting demand.
“Rents fell in the majority of markets as the pendulum swung firmly in the occupiers’ favor,” the New York-based broker said. Every corner of the world was affected in 2009, it said.
The biggest declines last year were in the Asia-Pacific region. The largest drop was 53 percent in Ho Chi Minh City, Vietnam, where many companies shelved expansion plans. Rental levels in Japan sank in the first half of 2009, and the pace of decline eased thereafter, Cushman & Wakefield said.
In North America, prime office rents fell by an average of 8 percent, with Boston reporting the biggest decrease at 26 percent, the broker said. They dropped 23 percent in downtown New York and 25 percent in London’s West End.
Global office rents will probably reach their low point this year as companies in some of the recovering economies regain confidence, the broker predicted. Rental growth is already being recorded in some districts, including the City of London and Oslo.
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