RESIDENTIAL RESEARCH GLOBAL CORPORATE LETTINGS REPORT ASSESSING PROPERTY MARKET CONDITIONS FOR CORPORATE RESIDENTIAL TENANTS 2015 CITY-BY-CITY: TOP AREAS CURRENCY IMPACT FOR CORPORATE TENANTS ON PRIME RENTS SCHOOLING: A TOP PRIORITY KEY FINDINGS GLOBAL OVERVIEW Demand for prime residential accommodation in the Corporate tenants seeking value world’s gateway cities is rising, led by economic growth for money and are increasingly conscious of the rental differential and the increasing trend towards integrated global between neighbourhoods in teams in the larger businesses. relatively close proximity In this report we review rental market Cape Town, Zurich and Toronto performance in London, New York, Hong FIGURE 1 Prime rents outperform prime prices recorded the strongest rise in prime Kong, Singapore and Mumbai – together Annual % change to Q2 2015 rents in the year to June 2015 with a review of Bucharest, a key emerging European centre. 10% A strong US dollar has led to According to Worldwide ECR, 45% of savings for US corporate tenants global multinationals expect international 5% relocating abroad over the last year assignments to increase but this figure rises to 54% amongst those with 0% For corporate tenants with families, headquarters in the US. A stronger dollar schooling is a concern with places means US companies are expanding -5% in some cities in increasingly once again. short supply Despite this expansion of demand, -10% Knight Frank’s Prime Global Rental Index, which tracks the performance of -15% 18 key cities, confirms that rental growth PRIME RENTS has been muted in recent years – rising PRIME PRICES only 0.2% in the year to June 2015. -20% London New York Singapore While cities like Cape Town, Zurich and Toronto have seen strong growth Source: Knight Frank Research, Douglas Elliman/ Miller Samuel Inc., Ken Corporation (10%, 8% and 5% respectively), rental performance in most cities has been would be paying $800 for the same weaker than might have been expected accommodation now, as a result of due to the increasing affordability currency and market movements. squeeze in many locations. At the same time European tenants Corporate tenants are placing greater have seen their budgets moving in the emphasis on value for money – with other direction due to the weakness employees being encouraged to take of the Euro. Over the same period control of their budgets directly, leading described above a French banker renting to a greater incentive for taking lower accommodation in New York would have priced accommodation options. seen the need for a weekly budget of Our focus in this report is to consider €1,000 moving to almost €1,500. neighbourhood level rental pricing, As we have discussed in previous confirming the substantial differentials editions of this report, challenges faced which can be achieved within relatively by global HR teams are not limited to close proximity – for example between the price of accommodation, the wider Central Park South and Midtown in New offer of lifestyle quality and education are York and between the Orchard Road critical in terms of the retention of staff. LIAM BAILEY Area and Serangoon in Singapore. On pages 6 and 7 we assess the issue Global Head of Research Currency fluctuations are an important of schooling, a key concern for families consideration for corporate tenants. relocating, particularly if heading to “ Our focus in this report is Hong Kong. The on-going strength of the US dollar to consider neighbourhood means that US tenants in particular I hope you enjoy this report and find our level rental pricing, confirming have seen strong savings in rental summary of the global corporate lettings the substantial differentials costs. For example a US tenant markets useful, if you have any queries which can be achieved within spending the equivalent of $1,000 a please contact me or my colleagues relatively close proximity.” week in central London in mid-2008 listed at the back of the report. 2 Please refer to the important notice at the end of this report GLOBAL CORPORATE LETTINGS 2015 RESIDENTIAL RESEARCH LONDON Market intelligence for the global corporate tenant LONDON KEY: Rents = a typical monthly prime rent for a 2-bed apartment or 4-bed family home as at June 2015 Tenant profile: Single executives Families Professional couples Students Professional profile: Banking & Finance Law HNWIs IT & Tech TMT Entrepreneurs St John’s Wood Hyde Park Marylebone King’s Cross Islington Wapping HONG KONG Rent: Rent: Rent: Rent: Rent: Rent: 2-bed US $4,400 2-bed US $6,800 2-bed US $6,800 2-bed US $5,100 2-bed US $3,700 2-bed US $3,400 KEY: Rents = a typical monthly prime rent for a 2-bed apartment or 4-bed family home as at June 2015 4-bed US $17,000 4-bed US $22,100 4-bed US $28,900 4-bed US $6,800 4-bed US $8,200 4-bed Unavailable Tenant profile: Single executives Families Professional couples Students Professional profile: Banking & Finance Law HNWIs IT & Tech TMT Entrepreneurs Consulates Professional Tenant Professional Tenant Professional Tenant Professional Tenant Professional Tenant Professional Tenant profile: profile: profile: profile: profile: profile: profile: profile: profile: profile: profile: profile: SINGAPORE Pull factors: Pull factors: Pull factors: Pull factors: Pull factors: Pull factors: Jubilee line (link to Canary Wharf), Green space, access to Central Transport links via Baker Street, Central location and excellent Short commute to The City, Proximity to The City, mid- proximityKEY: Rents to Regent’s = a typical Park monthly primeLine, rentHeathrow for a and2-bed the apartment Western oreasy 4-bed access family to homeThe City as and at June 2015transport links Clerkenwell and Shoreditch ranges prices, property types Corridor A40/M40 Canary Wharf, proximity to Tenant profile: Single executives Families Professional couples Students Professional profile: Banking & Finance Aerospace IT & Tech Oil & Gas (loft/warehouseLogistics Pharmaceuticalapartments) schools and parks MUMBAI The City Lycée International KEY: de Londres Rent: Rents = a typical monthly prime 2-bed US $4,700 St Joan of Arc 4-bed US $7,900 rent for a 2-bed apartment The Catholic School or 4-bed family home as at American School Professional Tenant June 2015 in London profile: profile: Tenant profile: Single executives Kensington Pull factors: Rent:Families Southbank Short commute to The City 2-bed US $8,500 Hampden International School William Tyndale and central location Professional couples Primary School 4-bed US $18,700 Gurney School Professional profile: Pembridge Hall St. Paul’s Cathedral School ProfessionalBanking & FinanceTenant Wetherby School profile: profile: IT & Tech Westminster HNWIs School Pull factors: Fox Primary School AccessEntrepreneurs to great schools, close International School Lycée Français proximity to Holland Park and of London (ISL) Charles de Eaton CEO’s Hill House Square School Hyde Park, plus access to Gaulle School The City St Paul’s Girls Francis Holland Garden House School Belgravia School Rent: 2-bed US $10,200 The St Paul’s 4-bed US $30,600 Boys Kensington Prep Knightsbridge School Professional Tenant profile: profile: Lady Margaret School Parsons Green Prep School Pull factors: Royal parks, boutique shops Ecole Marie D’Orliac & restaurants, proximity to Wix Primary West End & Mayfair Eaton House The Manor South Kensington Knightsbridge Clapham Aldgate SouthBank/Tower Bridge Rent: Rent: Rent: Rent: Rent: 2-bed US $4,400 2-bed US $5,100 2-bed US $4,800 2-bed US $8,200 2-bed US $3,400 4-bed US $5,500 4-bed US $7,900 4-bed US $13,600 4-bed US $23,900 4-bed US $8,200 Professional Tenant Professional Tenant Professional Tenant Professional Tenant Professional Tenant profile: profile: profile: profile: profile: profile: profile: profile: profile: profile: Pull factors: Pull factors: Pull factors: Pull factors: Pull factors: Shops and restaurants, transport, Retail offer, proximity to the Schools, green space, good Proximity to The City Proximity to The City and links to education from prep to university West End transport links Canary Wharf and universities Source: Knight Frank Research USD exchange rates calculated as at 30 June 2015. Note: The profiles shown highlight where there is a concentration of particular professions but the list is not exhaustive and all sub-markets attract a diverse range of professions and tenant types. In the year to June 2015 prime rents in neighbourhoods. Lawyers relocating to a village-feel in areas such as Kensington central London rose on average by 3.4% London look for proximity to Chancery Lane, and Clapham. with areas such as Marylebone and Hyde Temple and The City. Those in IT, media and Park outperforming the market average. the communications industry often gravitate London: winners and losers towards Islington and Kings Cross which The change in prime rents taking account of The improving UK economic landscape currency movements only saw annual rental growth exceed 4% gives them easy access to the technology Corporate tenants arriving in London from earlier in the year but the General Election hubs of Clerkenwell and Shoreditch. US China Hong Kong Eurozone dampened activity as the lettings market Single executives and young professionals entered a period of adjustment. Stock levels relocating to London spread their net wide increased as some owners chose to rent but areas such as The City, Wapping and would, compared to a year ago*, find prime rents... their property rather than sell as a post- South Bank rank highly with them. cheaper by cheaper by cheaper