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Luxury Rents Fall Around the Globe

Nairobi suffered the biggest drop, while Toronto saw the largest growth

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Prime rents in Toronto grew by 8.9% in the year leading to March 2016, leading the global ranking.

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Prime rents in Toronto grew by 8.9% in the year leading to March 2016, leading the global ranking.
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Luxury residential rents continue to fall globally amid an increased level of supply and economic uncertainty, finds a report released Thursday.

Out of 17 cities tracked by Knight Frank’s Prime Global Rental Index, 11 recorded flat or falling prices in the year leading up to March 2016. Rents went down on average by 0.5%, resulting in the third consecutive quarterly decline for the index.

Nairobi was the biggest loser, with a 7.9% decrease, due to lower demand from its biggest clients: expats.

The smaller presence of foreigners in the Kenyan capital is due to “multinational firms downsizing as a result of adverse economic circumstances driven by low commodity prices,” Knight Frank wrote in its report.

The world’s financial and trade hubs didn’t escape the downturn either. Prime rents declined by 5.2% in Hong Kong, 2.3% in New York, and 1% in London.

MORE:Fewer Luxury Buyers Looking to Turn Properties into Rentals in NYC

Knight Frank notes that uncertainty in global markets —partly as a result of Brexit, the U.S. presidential election in November and the timing of the next rate hike by the U.S. Federal Reserve —has led companies to adopt a wait-and-see attitude and postpone their investment decisions. As companies scale back, fewer workers —and potential renters of prime properties— need to relocate.

In the British capital, prime rental prices slipped 1% year-over-year, the lowest annual rate since May 2014. But it isn’t all bad news for London. Its “total rental yield,” a combination of capital growth and rental yield, was 3.7% in the year to March, according to the report.

A bright spot for prime rents is Toronto, whose growth of 8.9% put it at the top of the ranking.

“Strong demand for prime rental properties, combined with a low vacancy rate for condominium apartments, has driven prime rents higher,” the report found.

Regionally speaking, North America is still the best performer. Average prime rents there increased by 3.3% in the 12 months ending in March. Africa, for its part, was the weakest region, with rents falling on average by 3.2% over the same period.

MORE:Insider Advice for Entering New York’s Luxury Rental Market

Looking forward, Knight Frank expects its index to rebound as luxury sales —which tend to move in the opposite direction as prime rentals— take a hit from increased regulation and taxation, two factors that have put pressure on sales in places such as New York and London.

Knight Frank Prime Global Rental Index, Q1 2016

City 12-month% change
1 Toronto 8.9
2 Guangzhou 5.3
3 Cape Town 1.5
4 Shanghai 1.4
5 Vienna 0.9
6 Tel Aviv 0.6
7 Taipei 0.0
8 Tokyo -0.2
9 Moscow -0.6
10 Beijing -0.9
11 London -1.0
12 Zurich -1.7
13 New York -2.3
14 Singapore -3.6
15 Geneva -4.4
16 Hong Kong -5.2
17 Nairobi -7.9

Source: Knight Frank