London’s West End is the world’s most expensive office market for the second year in a row, retaining its title ahead of runner-up Hong Kong, according to research in Cushman & Wakefield’s annual Office Space Across the World report.

Characterised by strong demand and a dwindling supply of high quality space, the West End of London saw office rents increase by 5% in 2013. Furthermore, with rents largely unchanged in Hong Kong’s Central Business District (CBD) over the year, the gap in total occupancy costs between the two cities has widened.

Digby Flower, UK chief executive and head of London Markets, Cushman & Wakefield, said:"London remains attractive for many international businesses as its global appeal continues to grow. With prime space at a premium in the West End and a steady demand for offices from across all sectors, significant rental growth can be anticipated in 2014."

Moscow’s CBD surged from sixth position in last year’s ranking to third, with rents holding firm over the last 12 months as occupier demand remained consistent. Meanwhile, rental growth was predominantly flat across Asia Pacific with Beijing, Tokyo and New Delhi’s Connaught Place mostly stable over the year.

However, Connaught Place fell from fourth position to eighth due to an appreciation in both the U.S. dollar and euro against the Indian rupee in 2013; this caused a shift in New Delhi’s position in terms of global occupancy costs when measured on a dollar or euro basis.

In Europe, a lack of high quality space characterised a number of markets, including London and Frankfurt, and with demand in these cities advancing over the year, prime rents were put under upward pressure. Therefore, although the overall regional picture was relatively muted over the year there were notable differences from market-to-market. A regional uplift of 3% was recorded overall – the highest regional rise seen since before the depths of the economic downturn in 2008.

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Coming out of the double-digit expansion seen in 2012, prime rental growth in the Americas region was much more subdued, with an overall regional rise of just 1%. Rental performance in South America in 2013 was slow, deriving from muted growth in the key markets of Argentina and Brazil. Ongoing economic uncertainty in both of these markets caused occupier demand to ease and prime rents to fall over the year.

Asia Pacific

Rental growth was largely flat across Asia Pacific over the year, with an overall regional rental rise of just 2% in 2013. Economic conditions were more fragile in the first half of the year, although growth in core markets of Mainland China and Japan advanced as the year progressed. However, the region is well represented in terms of the most expensive office locations on a global scale. Hong Kong retained its position in second place overall, Beijing came in fourth position and Tokyo in fifth. Asia Pacific’s performance in 2014 is anticipated to be similar to that seen in 2013, with slow and stable demand anticipated to keep rental levels largely unchanged, albeit with incentives becoming more competitive.

For 2014, it is expected to remain on course for continued growth, slow but solid as last year, still supporting occupier demand across the region. The key economies of China, Japan and Southeast Asia are anticipated to drive the region forward, with demand for office space particularly in these countries gaining momentum over the year.

John Siu, managing director of Cushman & Wakefield Hong Kong, said: "While still relatively soft, notably from larger occupiers, demand for prime office space in Central stabilised in 2013. As a result, rents declined by only 1% last year. New supply is extremely limited, but occupier demand remains susceptible to volatility in the financial sector and global economy. Therefore, we are expecting Central rents to be stable in 2014."