Hungary is the 36th most expensive office location in the world

Tuesday, 19 February 2008
The world's top ten most expensive office locations saw rents, a large component of occupancy costs, increase by an average 40 per cent last year, according to Office Space Across the World 2008, a global report by real estate services firm Cushman & Wakefield.

Office Space Across the World 2008 compares office occupancy costs in 203 key locations in 58 countries around the world, with new entries in the global ranking including Kyiv in Ukraine (16th) and Vietnam's Ho Chi Minh City (17th place).



Hungarian overview

Nationally, rental growth in 2007 was 3%, with 9 % of take-up transacted on the Pest CBD, where rents rose by 5%. However, there is a significant supply coming on to the market, therefore rents may come under increasing pressure in 2008 and 2009, especially in the non-central and periphery locations.

Zsuzsa Fekete, Head of Office Agency at C&W Budapest says: "Performance in the Hungarian office market over the past 12-18 months has been steady, with an occupier market remaining active and buoyant. Large multinational companies such as IBM, NSN & Nokia, Citibank, Morgan Stanley and also the Hungarian owned bodies such as the Post took significant amount of office spaces in Category "A" buildings throughout Budapest.

A number of new service centers have decided to locate their operations on Váci út, the main business corridor of Budapest, while others have extended their lease. Some of the key shared service center transactions were Diageo in West End Business Center, Inbev and IBM in Duna Tower and Celanese Corporation in Váci 33. Another active business sector on the Váci út were state owned companies and agencies. Some of the larger transactions were ESZA in Atrium Park and Magyar Posta in Gateway.

Key transactions in South Budapest included T-Online and DBH in Infopark D, Philips in IP West and Nokia in Studium.

The periphery (Budaörs) saw a drastic increase of take-up from 5,000 sqm in 2006 to 19,000 sqm - mainly renewal deals for Pannon, Invitel, Capgemini and Johnson & Johnson - in 2007.



International overview

In this year's ranking, London retains its title as having the most expensive office occupancy costs in the world, with one square metre of prime space in London's West End at €2,277 a year (app. HUF 600.000), or US$312 per square foot (app. HUF 56.000), with rents up 30% last year in local currency terms. In second place is Hong Kong, at €1,745 (app. HUF 460.000), where rents were up 40% last year in local currency terms.

Of the 203 locations, 79% showed rental growth last year, 20% stable rents and only one per cent showed a rental fall (compared with 6 percent the previous year). Overall globally, rents grew by 14% in 2007, compared with 10% in 2006.

Elaine Rossall, Head of Business Space Research & Consultancy for Cushman & Wakefield in EMEA, says: "Last year saw the fastest level of growth in office occupancy costs in many of the world's top locations since the turn of the property cycle in 2001, with the strongest demand coming from the financial sector. Behind this growth is a shortage of top-quality product as developers remain relatively cautious, especially compared with the previous peak years of 2001 and 2002."

Looking forward, Elaine says: "We are unlikely to know the full effects of the current credit squeeze on the world's main office locations until further into 2008. In the meantime, we foresee the market for the right product in the right location remaining robust, especially in the more buoyant markets of Asia Pacific, although expectations are that last year's strong rental growth will ease this year."

This year's risers

In the top ten of the global ranking, the biggest risers include Singapore, which went up ten places to join the top ten at position #7. Prime office rents rose 78% in Singpore last year in local currency and, together with strong performances in India and Vietnam, helped Asia Pacific to achieve the strongest regional growth, with rents rising 25% over the course of 2007.

Meanwhile, Moscow rises two places to join the top five ranking for the first time, with prime occupancy costs now above those of Paris, which in addition has been overtaken by Mumbai.

The strongest riser in the global ranking is Oslo, which goes up 14 places to 11th position.