Savills: Residential rents outpace capital value growth in major cities around the world

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“Mega-cities are thriving again as tenants are brought back to city life after lockdowns are lifted. Inventory shortages and pent-up demand for city living, spurred by the reopening of international borders in late 2021, continued to fuel the revival of business travel, shoppers “try before you buy” and the prioritization of home through flexible work patterns are all driving the growth of prime rental markets in major cities around the world,” said Lucy Palk, analyst, Savills World Research.

New York, Singapore, London and Los Angeles drove growth, all recording increases in prime rents of more than 5%, benefiting in particular from the return of international travel. Despite a broader U.S. trend of migration to smaller cities, particularly in the tech sector, the Big Apple continues to tap into a deep demand base and is expected to maintain low vacancy rates through the summer, its peak season for rentals. New York rents are at an all-time high, due to tight inventory and demand for larger spaces, for which tenants are willing to pay extra.

Savills Global Residential Cities Rental Index – ranked by semi-annual rental growth

Town

Growth in prime rents – Dec 2021 – June 2022

Weighted prime yield rate (June 2022)

New York

8.5%

4.7%

Singapore

8.5%

2.7%

London

7.7%

3.1%

Lisbon

7.6%

2.9%

Miami

5.8%

4.0%

Los Angeles

5.5%

4.6%

dubai

5.3%

4.8%

sydney

4.8%

1.8%

Kuala Lumpur

4.8%

3.1%

San Francisco

4.6%

3.0%

The cap

4.5%

4.4%

Berlin

4.4%

2.8%

Milano

4.2%

2.4%

Tokyo

3.6%

3.3%

Shanghai

3.0%

1.4%

Rome

2.5%

3.5%

Paris

2.3%

3.1%

Madrid

1.8%

3.0%

Barcelona

1.5%

3.5%

Athens

1.0%

4.0%

bangkok

0.7%

3.8%

Seoul

0.4%

2.4%

beijing

0.3%

1.7%

amsterdam

0.2%

3.6%

Hangzhou

0.2%

1.4%

Canton

0.1%

1.3%

Bombay

0.0%

3.0%

Geneva

0.0%

2.1%

Shenzhen

-0.7%

1.5%

hong kong

-1.3%

2.0%

Source: Savills Research

In Lisbon, Miami and dubai rents have risen rapidly, taking advantage of broader lifestyle trends seen in other markets, all topping 5%. Leading the Savills Executive Nomad Index, demand for high-end residences in Lisbon remains strong as tenants are attracted to a relatively affordable global location, offering a high quality of life, more space and lower cost of living. inferior.

In contrast, Asian cities such as hong kong, Shenzhen and Hangzhou saw more subdued performance, still struggling with Covid-19 related challenges.

In the six months to June 2022, the average gross prime yield across the 30 index cities remained at 3%. dubai, New York and Los Angeles are the most productive cities, above 4.5%, despite having moved in since June 2021.

At the other end of the spectrum, Asia-Pacific cities dominate. In sydney, Seoul and beijing prime yields range from 1.5% to 2%. Rents outperformed capital values ​​in Sydney (up 4.8% and down -1.7%, respectively). The opening of the international border in November 2021 has been fundamental to the city’s rental market and growth is expected to continue despite economic headwinds.

Paul Tostevin, head of Savills World Research, said: “A lack of inventory will continue to fuel near-term growth, particularly for the type of residences that prime tenants are demanding: quality centrally located units with larger floor plates. For these properties, the Covid lockdown rental agreement is definitely a thing of the past.”

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