Market rents represent available supply, occupier demand and affordability, unclouded by speculative or investment activity. Our analysis of occupier costs, including rents for both residential and office space, are of direct importance to occupants and would-be occupants, as they influence where and how people will end up living and working in a city – but they should also be the touchstone for any longer term investor.
Rental levels reflect the number of people seeking space, either for living or working in a city, and their ability to generate cash for rental payment. This operates against the supply of the right work/living space that people want.
Average rental growth across our world cities in 2015 (see fig.1) was 2% for office space and 1% for residential – these averages covered a range of different experiences. Residential rents in San Francisco grew by 14%, but they fell by 18% in Moscow. Sydney topped the office rent growth table at 11%, while Dubai’s office rents fell by 16%. Not only do different supply conditions pervade in different cities, demand patterns have also changed significantly.