ECONOMY

Office rents stabilize after a long drop, global survey finds

The cost of office rentals is stabilizing around the world, according to a survey by consultants King Sturge, represented in Greece by King Hellas. Athens remains one of the most expensive cities worldwide despite a drop exceeding 20 percent in the past two-and-a-half years. According to the survey, the global real estate market – and especially the industrial and office space sectors – has followed the recent vagaries of the global economy. As a result, the most difficult period seems to be over. In early 2004, office rents rose 1 percent globally. A 1 percent drop in Europe was more than compensated for by a 2.5 percent rise in the United States and in the Asia-Pacific area. A lot of these results depend on the currency in which they are expressed. In dollar terms, office rents have risen 7 percent, but expressed in euros, they have dropped 2 percent. In all of the world’s prominent business centers, prices have dropped slightly. London remains the most expensive market: Offices in the West End are rented for 1,350 euros per square meter (sq.m.) per year, while in the City they go for only slightly less (1,107 euros per sq.m. per year). Tokyo is next, with annual rents in its most exclusive areas averaging 1,045 euros per sq.m. and Paris follows, with 796 euros per sq.m. per annum. Athens, and specifically the corridor along Kifissias Avenue, which has the greatest demand among companies, remains fairly high on the list: It is 11th, with annual office rents averaging 495 euros per sq.m. That puts it ahead of, among others, New York (480 euros), Rome (396 euros), Madrid (394 euros) and Barcelona (316 euros). The continuing global drop in office rents, albeit at a much slower pace than before, is due to the fact that at this early, and still uncertain, stage of economic recovery, businesses are still wary of expansion. Many offices rented during the good old days – that is, in 1999-2000 – now stand empty. Companies are taking advantage of availability to fight for still lower rates. According to the survey, this may not last long, as office availability is stabilizing and may be shrinking. As for Athens, «during the past 30 months rental prices along Kifissias Avenue dropped from 22 to 27 percent. We estimate that, in the immediate future, prime office space rentals will continue to drop,» says Thomas Ziogas of King Hellas. «According to the latest data, supply of office space is still satisfactory while demand shows a significant drop. At present, rents for new, modern office space are at 20-22 euros per square meter per month. The same space is sold for 3,000 to 3,100 euros per sq.m.,» adds Ziogas. Older office space – 10 years or older – may be rented at half price.