Prime rents in key cities around the world

Prime rents in key cities worldwide rose by 0.2% in the first quarter of 2013, the index’s lowest rate of quarterly growth since late 2009.

Key points 

* The Knight Frank Prime Global Rental Index rose by 0.2% in the first quarter of 2013 and by 3.8% in the year to March

* The index has risen for 15 consecutive quarters and now stands 20.3% above its low in the second quarter of 2009

* Dubai saw the largest increase in prime rents, up 18% year-on-year

* The leading financial centres of Hong Kong, New York and London were some of the weakest

performers, recording falls of 2.3%, 2.6% and 3.1% respectively

* On a regional basis, the Middle East saw the strongest rise in prime rents (up 13.1%) and North

America the weakest (down 0.7%)

Prime rents are rising strongly in many emerging markets, but this growth is being overshadowed by weakening rents in some of the world’s more established financial centres such as Hong Kong, New York and London.

Luxury rents in Dubai, Nairobi and Beijing rose by 18.3%, 13.9% and 12.3% respectively in the

year to March. 

By comparison, Hong Kong, New York and London saw prime rents fall by 2.3%, 2.6% and 3.1% over the same period. In this second group of cities, the rental markets have suffered as relocation budgets for executives have been trimmed during a period of weaker financial sector performance.

Despite the slower rate of growth this quarter, the index, which tracks the performance of

luxury lettings markets worldwide and which is increasingly influenced by corporate and

expatriate demand, has now risen for 15 consecutive quarters and stands 20.3% above its low in Q2 2009.

Global mobility is on the rise as companies look to plug their skills gap but the latest figures suggest it is increasingly a west to east shift with many multinationals relocating a growing  a portion of their key talent to growth markets in Africa, China and the Middle East.

A regional breakdown of rental performance confirms this trend. The Middle East, Africa and Asia saw average growth of 13.1%, 7.0% and 3.1% respectively in the year to March.

Prime rents in Europe and North America fared less well, recording average growth of 0.9% and -0.7%. Here, salaries are failing to keep pace with inflation and the economic recovery remains in a fragile state.

With the US jobs market picking up and tentative signs of improving business sentiment in the Eurozone we may see rents strengthen in New York and potentially London in the second half of 2013. However, we expect the emerging markets to continue to top the rankings as established industries in Europe and the US look to tap into new world markets.

Knight Frank Prime Global Rental Index, percentage changes over 12-month, 6-month, 3-month period

1 Dubai Middle East 18.3% 10.1% 3.5%

2 Nairobi Africa 13.9% 7.5% 2.2%

3 Beijing Asia Pacific 12.3% 4.4% 1.8%

4 Tel Aviv Middle East 7.9% 5.4% 3.6%

5 Zurich Europe 6.3% 3.1% -1.5%

6 Guangzhou Asia Pacific 3.1% 1.0% 0.5%

7 Shanghai Asia Pacific 3.0% 0.7% 0.5%

8 Geneva Europe 2.8% 2.8% 2.8%

9 Singapore Asia Pacific 1.9% 1.5% 0.8%

10 Toronto North America 1.2% 0.8% 1.2%

11 Tokyo Asia Pacific 0.7% 1.6% -0.2%

12 Cape Town Africa 0.0% 0.0% 0.0%

13 Hong Kong* Asia Pacific -2.3% -0.7% -5.1%

14 Moscow Europe -2.6% -1.1% 0.1%

15 New York North America -2.6% -6.5% -6.6%

16 London Europe -3.1% -1.6% -0.3%