London: most expensive European city to rent commercial property

19 March 2008

London, UK - London still tops all the tables as the most expensive European City to rent prime office, distribution and retail space, according to Knight Frank's latest European Market Indicators research which covers 21 key European cities.

London's prime office rents stand at EURO 1,607 per sq m; with prime distribution rents at EURO 212 per sq m; and retail in Shopping Centres at EURO 6,427 per sq m.

Prime offices – leasing

London’s West End continues to be the most expensive location in Europe in which to rent office space with prime rents standing at EURO 1,607 per sq m. Despite high levels of development, Moscow ranks second at EURO 1,358 per sq m, the delivery of new space to the market has failed to push availability levels higher as demand continues to outstrip supply, followed by Paris at EURO 840 per sq m and Dublin at EURO 700 per sq m.

Prime offices - investment

Paris and Madrid office markets have the lowest prime office yields at 4.00%, with yields in London having moved out by 100 basis points over the last 6 months. Dublin and Barcelona which stand at 4.25%, are both showing keener yields than London. Moscow still shows the highest prime office yield at 8.00%.

Prime distribution - leasing

Prime distribution rents at London’s Heathrow stand at EURO 212 per sq m, with Dublin coming second at EURO 140 per sq m. Madrid, Barcelona, Edinburgh, Stockholm and Moscow range from EURO 100 to 104 per sq m.

Prime distribution – investment

Dublin has the lowest prime distribution yield at 5.00%, followed by London, Madrid, Copenhagen and Paris which stand at 6.00%. Moscow has the highest prime distribution yield at 9.50%.

Prime retail – leasing

Prime retail space in London shopping centres are first place at EURO 6,427 per sq m, significantly ahead of Dublin which stands at EURO 4,500, Edinburgh at EURO 2,560, and Paris at 2,500 per sq m. Rome and Prague’s prime retail rents are the lowest in Europe at EURO 600 per sq m.

Prime retail – investment

Dublin has the lowest prime retail yield in Europe at 3.25%, followed by Paris at 4.00%, and London, Madrid, Amsterdam, Stockholm, Milan, and Rome at 5.00%. Moscow has the highest prime retail yield at 8.00%.

Joe Simpson, head of international research, Knight Frank said: “The yield correction already seen in the UK has yet to be fully evidenced in the other major European centres, the fact that London has already seen a 100 basis points outward movement in the last 6 months, whilst maintaining the highest rental levels, offer a strong argument for London as investment destination. The underlying conditions in the majority of occupational markets remain favourable, although the pace of rental growth is likely to moderate moving forward, demand remains healthy and vacancy rates are low by historical standards.”

Knight Frank global indexes 2008. Commercial real estate