London office rents fall twice as fast as NYC

Office blocks are seen in the Canary Wharf business district in London January 19, 2009.

LONDON (Reuters) - Office rents in London fell twice as quickly as its main international rival New York City last year, as the capital bore the brunt of the crisis in the financial sector, a report said on Monday.

Annual rents in London on average dropped 24 percent to 63.28 pounds per square foot (psf) by the end of 2008, while rents in Manhattan fell 12 percent to $76 (53 pounds) psf, said UK-based NB Real Estate and New York's PBS Real Estate in the joint report.

The impact of the financial crisis and its resultant job losses has been extra severe on London's office market, as some 33.5 percent of the city's workforce is employed in financial services compared with 25 percent in New York City, the report said.

"London is shedding jobs in finance at a faster rate than New York, so inevitably demand for office space in London is falling much more rapidly than Manhattan," said NB Real Estate director James Crisp.

Banks and financial services groups have announced some 325,000 job cuts globally since August 2007, when the credit crisis began to intensify.

Rents in London, home to some of the world's most expensive office space, are also coming off from a much higher ceiling, the report said.

In parts of the prime West End district, where many hedge funds had gathered, annual rents surged to a peak of 120 pounds psf at the end of 2007, compared with top rents in midtown Manhattan of about $95 psf.

"The New York occupier base is quite diverse and the finance sector in the U.S. is more dispersed geographically than it is in the UK -- many of the hedge funds are based in Greenwich, Connecticut for example," said John Brod, Principal of PBS.

The value of London's office buildings held up slightly better in 2008 however.

Capital values for Manhattan offices fell 31 percent last year, while that for London offices dropped 26.8 percent, the report said, adding that the vacancy rate at end-2008 stood at 9 percent in New York City against 8.6 percent in London.

(Editing by David Holmes)