2023 prime office rents rose an average of 1.9% globally, 2024 likely to see 0.3% growth
Q4 2023 saw the sixth consecutive quarterly increase in net effective costs across the 35 cities examined by Savills. The five cities at the top of the table remained unchanged between Q3 and Q4 2023, with London’s West End remaining in the number one position.
Savills forecasts that prime rents alone are likely to rise by 0.3% on average in 2024 across the cities it has analysed, although regional predictions vary between 2% growth in EMEA markets, staying static at 0% in North America, and -1% in Asia Pac. The latter is due to the volume of prime buildings that are due to be completed this year, which will have the potential effect of decreasing rents across these markets. Across the American markets, meanwhile, the wait-and-see approach from landlords is likely to keep rents flat in many cities, with only the very top tier assets seeing any increase in pricing. In EMEA the flight to prime and lack of top quality, sustainable buildings is likely to keep rents on an upwards trajectory, says Savills.
Rebecca Webb, director of EMEA cross-border tenant advisory in the Global Occupier Services team at Savills, comments: “While costs clearly matter, the themes seen over the last year demonstrate that there are other factors at play in terms of occupier priorities for 2024 beyond the bottom line. Looking ahead, our global teams expect trends from the flight to quality, the strong focus on employee wellbeing, ESG and sustainability considerations, and flexible office solutions to continue.
“Whilst the specific challenges, market dynamics, and priorities vary, this underlines the necessity of tailoring occupier strategies to local conditions through the coming year. As new considerations begin to emerge such as the impact of AI on business decision making, or the need for a universal building certification to support the necessity to decarbonise, it’s an exciting time helping our occupier clients contend with the diverse trends driving their global real estate portfolios strategically.”
Kelcie Sellers, associate in Savills World Research team, adds: “The narrative around offices in 2023 was gloomy, but our year-end data for the Savills Prime Office Costs index shows generally rents did increase as occupancy rates improved, although not at the same pace across the world. Net effective costs increased at a higher rate, however, due to the ongoing rise in fit-out costs worldwide; as more occupiers choose to locate in top quality offices, the costs to create these ever-more top-tier offices inevitably increases.”
