Luxury rents rise fastest in emerging markets

Prime rents in key cities worldwide rose by 0.2% in the first quarter of 2013, according to the latest Knight Frank Prime Global Rental Index.

This is the index’s lowest rate of quarterly growth since late 2009.

Knight Frank’s Kate Everett-Allen said: “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 property for rent 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 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 euro zone 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 world markets.

“For a city-by-city breakdown examining which property types and districts are most popular with corporate assignees, and for an indication of typical monthly rents by city see our latest Global Corporate Lettings Report.”

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