Prime offices in Birmingham are cheaper by half to occupy than London's West End, reveals CB Richard Ellis in its latest world survey of office rents and occupancy costs.
Birmingham is placed seventh in the 50-strong global market table - just behind Dublin - while London's West End and City are in first and second positions. Fourth-placed Paris is sandwiched between the two Tokyo office sectors.
Birmingham's prime office rents level is #27.50 per sq ft which, with rates and service charges, adds up to an annual total occupancy cost of #40.78 per sq ft, representing a 15.8 per cent rise in 12 months.
Even so, Birmingham - the highest placed of the UK regions - is way below the West End, where the top rent is #66 per sq ft and the overall occupancy cost is #90.62 per sq ft.
In the City, the rent is #48.50 per sq ft and the total occupancy cost is #70.49. Overall, costs in the West End dropped very marginally by 0.1 per cent while the City only experienced a 2.1 per cent increase.
Julian Shellard, CB Richard Ellis' chairman of the regions, based in Birmingham, says: "The increase in rents in the regional cities, including Birmingham, is in sharp contrast to London and the South-east and is a reflection of the very limited supply of top quality accommodation.
"There is every sign that rental levels will be maintained in the future which means that occupiers' need to forward plan as far as possible to secure the best possible deal on what inevitably will be pre-lets."
Elsewhere in the UK, ninth-placed Edinburgh has a prime rent level of #27 per sq ft, with total costs of #38.52 per sq ft, Manchester (11th) racked up a 10.1 per cent increase with a prime rental level of #24.75 per sq ft and total costs of #37.76 per sq ft, and Glasgow (13th) clocked in with figures of #23 and #35.24 per sq ft.
The after-effects of the September 11 terrorist attack on New York have continued to affect office markets there. In the last 12 months, Downtown Manhattan suffered a 11.8 per cent fall in rents while in Midtown Manhattan the drop was 9.8 per cent.
According to the CBRE Global Market Rents survey, European companies are delaying decisions regarding acquisition of new office space until the outlook is more secure. This is keeping take-up at relatively low levels.
It adds: "The lack of activity from the private sector is being compensated in some cities by increased leasing activity from public sector occupiers."
On the supply side, the flow of new development completions is starting to dry up as schemes started in better market conditions are finished. Very little is now being started without substantial pre-lets, and so vacancy rates are expected to peak close to their current level in most locations.
Vacancy will remain high for some time, says the report, putting further downward pressure on rents.