LONDON-The West End of London has retained its status as the most expensive office location in the world, but the gap between it and second most expensive, the City of London, has widened to 48%. The ranking is the result of a newly issued report from CB Richard Ellis.

Other cities to report increases greater than 10% in occupancy costs were New Delhi and Hong Kong. The most expensive US location is now Midtown Manhattan, which ranks 20th at $52.04 per sf.

Over the past three years, there have been only nine changes in the top 50 most expensive cities. “Nearly all of these have been European cities that have entered the top 50 at the expense of US cities,” says the report. “The sharp fall in the value of the dollar since mid 2003 and significant falls in rental values following the dot-com crash in 2001 and the subsequent economic downturn have left US markets looking very cheap to those elsewhere in the world.” There are now only four US locations in the top 50 compared to 10 about three years ago.

The contrast with London could not be sharper. The West End not only remained the world’s most expensive office location at $177.39 per sf but with a much increased margin. The increase is due partly to a slight increase in the value of sterling against the dollar. But it is also due to a sharp rise in prime office rents in West End offices over the past six months. There is now a 48% difference between occupancy costs in the West End and the second most expensive location, the City of London, where costs are now $119.49 per foot.

The figures in the West End have been boosted by a few high-value deals in the prime Mayfair submarket. This is attributed in the report on “the limited availability of high-quality new space that has served to restrict tenant choice and hence drive up rents.”

But more than half of the 50 most expensive locations in the world experienced a fall in total occupational costs. In Rome, Toronto, Paris and Milan the fall was more than 10%.

“As the dollar has stabilized over the past six months, gaining slightly against some currencies, this fall can be blamed mainly on falling rental values,” says the report. Outside the top 50 the biggest fall was in Caracas where occupancy costs fall by 30% over the past year to $20.62 per sf. This was due to the weak economy in Venezuela.

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