Mumbai: Global prime office rents fell by an average of 4.25 per cent in 2008, says a study by Knight Frank's Global Real Estate Markets Review and Outlook 2009.
India is also facing the heat of global downturn, and the rents in Mumbai and New Delhi have fallen by nearly 10-25 per cent.
The study, which covered major office markets across the Americas, Europe, the Middle East, Africa and the Asia Pacific region, revealed that office rents in more than half the 102 cities have witnessed declines.
Knight Frank noted the strongest declines were in Europe, where rents fell by 12 per cent on average and two-thirds of the continent's major office markets experienced negative growth. Several European markets have continued to see falling rents in the first quarter of 2009, including London and Moscow, which recorded two of the largest falls in 2008.
Joe Simpson, head of international research, Knight Frank, commented: "Despite a number of European markets observing rental falls in 2008, values should stabilise in the latter half of this year.
"Markets that weathered the effects of the downturn in 2008 included the primary German cities and regional UK markets, including Glasgow, Edinburgh, Leeds, Sheffield and Bristol. However, the substantial depreciation of the British pound against both the US dollar and the euro now means rents have fallen substantially.
"Positively, the supply of new office space in the development pipeline is at a more modest level than has been the case in previous downturns, although there are exceptions."
North American markets experienced a more marginal decline in rents, with values falling across most of the markets surveyed. The major financial centres of New York and San Francisco saw more significant fall in rental values, as compared with the rest of the US.
Asia-Pacific office markets recorded minor growth over the course of the year, resisting the downward trend in rental values.
Asia-Pacific had initially seemed well placed to weather the global slowdown, but as the financial crisis has deepened, the region's economies have come under tremendous pressure. The effects of the slowdown have been most evident on those economies, which are most closely integrated into global financial and economic systems, such as Hong Kong and Singapore; however, its influence can be seen across the whole region.
Weakening demand in the West for manufactured goods has affected export orders received by Asia's industrial producers and those economies dependent on commodity exports have been affected by sharp declines in commodity prices.
GDP growth should remain positive across most of Asia in 2009, though significant contractions are expected in Japan and Singapore. However, while forecasts of GDP growth for India and China of around 5-6 per cent may, on the face of it, appear strong, these are steep falls and will contribute to the global slowdown as much as many economies that actually record negative growth.
India's property market has cooled down following several years of rapidly rising rents and aggressive development activity. Prime office rents in the best sub-markets of Mumbai and New Delhi have fallen by 10-25 per cent from the levels recorded at the end of 2007. Both cities continue to have huge development pipelines, however, financing problems have caused developers to delay the start of an increasing numbers of planned projects.
Simpson said: "Commercial real estate is in a period of significant re-pricing, with some markets further ahead in the process than others. In a challenging market, investors will need to keep clear heads to be able to assess when and where opportunities might arise during 2009 and be well placed to capitalise when markets return to growth."