Asia’s office market too expensive for small businesses

Asia’s office market has experienced a surge in rents, pushing businesses away from select cities, according to a recent report from Knight Frank, the global property consultancy.

Knight Frank’s research found office rents in Asia’s leading cities have been rapidly rising over the last five years, with Hong Kong regaining the title as the most costly office destination in the world - knocking London’s West End of the top spot for the first time in six years.

Despite the recession, traditional business centres have retained their global status said Knight Frank, however there has been significant movement in office rents in Asian locations with Beijing being the biggest riser from 25^th to 12^th place over the last five years.

Experts at Knight Frank believe the difference in office rents may lead to business relocations throughout the world, and pointed to the Germany as a possible location, as it appears to offer some of the most competitive rents.

"In 2013, a recovering global economy, and constrained development activity in most major cities will result in more relocations." Tony Nicholas, head of Global Corporate Services for Knight Frank.

In the U.S, there was movement in North America’s market in 2012 with San Francisco moving up six places in the global office rent charts, driven by demand from technology companies. Manhattan also saw improvement, jumping five places to 10^th place.

Knight Frank forecasts further growth in rents in China’s leading cities, but recognised potential for growth in Germany’s office market, singling out Frankfurt as a leading attraction.

“The overall picture on global rents is mixed, growth in Beijing and Manhattan, little change in London and Frankfurt. Global corporations in 2012 were anxious to avoid unnecessary expenditure, which meant less office moves and hard discussions on rents,” said Tony Nicholas, the head of Global Corporate Services for Knight Frank.

Commenting further, Mr Nicholas said: ‘London’s West End and Paris confirmed their positions as perennial locations in the global economy hanging on to second and fifth places. The West End has a hefty lead over Moscow in third place so it is unlikely to be overtaken in the next study.

“In fact, with a vacancy rate of 5.6%, we expect further growth in famous postcodes such as Mayfair and St James, so London might close the gap on Hong Kong in 2013,” he explained.

Office markets were also impacted by the inflationary effect brought on by the Swiss Franc, with Geneva rising nine places over the last five years. Australia also experienced growth in its office rents, notably Perth, driven by a demand for the continents raw materials.

Moscow claimed third spot for the most costly office rents in the world.