London's West End has overtaken Tokyo as the most expensive location in the world in which to rent office space during 2010.

The figures are revealed by Knight Frank's Global Real Estate Markets Annual Review & Outlook 2011, which reviews current conditions in commercial property markets across the globe and surveys office rental levels in 105 international markets. The West End had dropped to second place in the rental rankings in the 2009 and 2010 surveys, as a result of falling rents in the aftermath of the collapse of Lehman Brothers, but this year's report sees it regain top position on the back of a revival in occupier demand which has fuelled strong rental growth.

Prime office rents in the West End of London reached £85 per sq ft per annum at the close of 2010, a 31% jump from the start of the year. Since the end of last year, West End office rents have risen further, to £90 per sq ft due to a further reduction in supply and growing interest from Media firms, such as NBC, Google and Apple. In contrast, Tokyo has seen office rents fall as a result of rising vacancy rates and a relatively weak economic outlook, even prior to the recent earthquake.

The Hong Kong market has risen to third place in the rankings, having seen a rapid recovery in rental values, triggered by increased competition among occupiers for a limited amount of available Grade A space. The top 10 is completed by Moscow, Paris, Singapore, London (City), Sydney, Mumbai and Lagos; a mixture of established global financial centres and emerging office markets.

Around half of the markets included in the survey are expected to see rental growth in 2011, while rents should be broadly flat in a further third. This reflects the continued stabilisation and recovery of office market conditions across most global markets, as demand for space gradually improves and rental growth spreads to an increasing number of cities. This trend has been accelerated by a squeezing of new supply levels, as development activity has slowed sharply, particularly in Europe and North America.

'Globally, commercial property markets are in the midst of a multi-speed recovery, which has been led by major financial centres such as London, Hong Kong, Singapore and New York,' said Matthew Colbourne, senior international research analyst. 'The improvement of the world economy in 2010 helped to boost demand for office space in these markets, which, combined with a slowing of development activity, caused rents to rise and vacancy rates to fall. However, rents remain under downward pressure in a smaller group of markets, where the economic outlook remains uncertain or availability is high, including Madrid, Seoul, Dubai and Los Angeles.'

Top Ten Most Expensive Global Office Markets

Rank Rank last year City Prime office rent
(UK£ per sq ft pa) Rental outlook
1 2 London (West End), UK 85.00 Rising
2 1 Tokyo, Japan 83.67 Falling
3 10 Hong Kong, SAR China 71.77 Rising
4 3 Moscow, Russia 60.05 Rising
5 4 Paris, France 59.68 Rising
6 9 Singapore 56.91 Rising
7 12 London (City), UK 55.00 Rising
8 11 Sydney, Australia 51.86 Rising
9 15 Mumbai, India 51.08 Stable
10 5 Lagos, Nigeria 50.44 Stable