Office rents for the highest floors of London skyscrapers climbed roughly 11 percent in the last six months, and occupancy rates have hit multiyear highs, Bloomberg reported Thursday. Hong Kong, however, remains the priciest city for office space.
London annual rents surged to $122 a square foot, making it the biggest increase in the period, according to a 20-city index compiled by property broker Knight Frank LLP. Vacancy rates for the British capital have also fallen to their lowest levels since 2001, CNBC reported. London is now the third most-expensive place to rent skyscraper space, tying with Tokyo.
“Firms in London have put the global financial crisis far behind them, are planning for the future, and are expanding their offices. There is a willingness to pay more to get exclusive accommodation, and this has resulted in greater demand for skyscraper space,” said James Roberts, chief economist at Knight Frank LLP, Bloomberg reported. “A range of companies -- from private-equity firms to oil companies and insurers -- view London as the business location to expand their operations.”
Hong Kong remained at the top of the list, with offices near the top of the city’s skyscrapers costing $255 per square foot. New York City only grew 2 percent but still ranked second, charging $153 per square foot a year on average. San Francisco was the best-performing U.S. city, reporting an 8.2 percent growth in annual rent prices at $105 per square foot, the biggest surge after London.
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A number of high-profile skyscrapers have shot up in London recently that have, "delivered space to the market capable of setting new benchmark levels for rents," according to the report. New towers that popped up last year included the “Walkie-Talkie” and the Leadenhall building, also known as the "Cheesegrater.”
"Occupier confidence has obviously played a major role in the increase in tower rents achieved across most of the major global cities. However, the main point of interest is that this confidence has coincided with occupiers being more prepared to compete for space that was traditionally outside their preferred locations," said William Beardmore-Gray, Global Head of Office Agency at Knight Frank, CNBC reported.