City of London slips down table of most expensive offices

22 April 2009

Paris and Geneva have knocked the City of London out of the top three most expensive office locations in Europe, and the West End of London sees the biggest fall in office rental values in Europe.

The City of London has been knocked out of the top three most expensive office locations in Europe by Le Triangle d’Or in Paris and Geneva, reveals research by NB Real Estate, the commercial property agency, and ONCOR International, the global commercial real estate network. Le Triangle d’Or is the neo-classical area between the Champs-Elysees and the River Seine that is often compared to London’s Mayfair district.

A 38% fall in City of London office rents to €593 per sq meter (from €951 12 months earlier) means the district now only has the sixth most expensive offices in Europe putting it far behind the €750 per sq metre in Paris Triangle d’Or, €623 in Geneva and €600 in Dublin.

The West End of London remains the most expensive office district in Europe despite experiencing the largest fall in office rents across Europe with almost half (45%) wiped off its office rental values in Euros (down from €1,757 to €961 per sq metre pa). NB Real Estate says that this fall in rents has been largely driven by the slump in the fortunes of many hedge funds which in happier times saw no problem with paying ever higher rents for prestige Mayfair properties.

The two best performing cities were Geneva and Zurich. Geneva has seen a 14.6% increase in the cost of rented office space and Zurich a 5.5% increase. NB Real Estate says that although the Swiss economy is expected to contract this year it has performed better than other international financial centres such as London and New York.

NB Real Estate and ONCOR International’s research reveals that office rents across Europe have seen their weakest performance since 2004, with just 48% of European office locations registering growth in rental values, down from 75% which showed rental growth in 2007. NB Real Estate says that the figures highlight that the problems in Europe’s commercial property market are not reserved to the former hotspots of London, Dublin and Moscow.

James Crisp, Director at NB Real Estate, comments: “Swiss banks may have taken the axe to their London based investment banking operations but as a whole their private banking sector has held up relatively well. Whilst the City of London and the West End now have a substantial overhang of spare office space that does not seem to be the case in the major Swiss cities.”

“There is some good news in all of this for London. London office rents had been viewed as pretty pricey but they are now much more competitive and the collapse in Sterling versus the Euro has helped that process along. As confidence comes back multi-nationals will need to make decisions on where to locate new operations and London’s cheaper real estate costs should now work in our favour.”

“Britain’s boom in financial services has left us with a valuable legacy of high concentrations of high quality, modern office space. Add that to London’s skilled and flexible labour force and the City remains the top European location for multinationals.”

The ten most expensive office locations in Europe
Rents € per sqm 2007 Rents € per sqm 2008 Percentage change
London West End 1,757 961 -45%
Moscow 1,025.9 873.3 -15%
Paris Triangle d’Or 830 750 -10%
Geneva 543.7 623.1 15%
City of London 951 593 -38%
Dublin 670 600 -10%
Zurich 528.6 557.5 5%
Paris La Defence 520 550 6%
Paris Seine R/Gauche 550 550 0%
Kiev 600 540 -10%

After the slump in rents in London’s West End and the City of London Moscow office rents suffered the third largest fall in Europe dropping 15% to reach €873.3 per square metre in the past year.

James Crisp says: “Moscow’s office rents surged on the back of the commodity boom and as that boom came to a juddering halt office rents inevitably tumbled. Rents for prime offices in Moscow are still amongst the most expensive in Europe - how well Russia deals with it latest economic crisis will determine whether it stays there in that position. Depreciation of the rouble suggests rents have further to fall.”