K
night Frank's Prime Global Rental Index (PGRI) shows a slowdown in prime rental growth across 16 key cities, with rents rising by 2.2% over the past year - the slowest pace in more than three years. This decline follows a steady drop from a peak of 11.4% in Q1 2022 and marks its lowest rate since mid-2021.

    The recent slowdown indicates a reversal of factors that drove prime city rents up by 28% since late 2020, including robust wage growth and limited new-build supply. Quarterly growth in the PGRI stood at 0.3% in Q4 2024, slightly above the previous quarter but still below the long-term average.

    Tokyo led the pack with an annual rental growth of 6%, driven by strong demand and limited supply. Zurich and Melbourne also ranked among the top three cities for rental growth. Conversely, Toronto, Auckland, and Singapore experienced rental declines throughout 2024.

    On a quarterly basis, Tokyo, Zurich, Monaco, and Hong Kong posted strong growth of 2% or more, while four other markets reported declines. Inflation-adjusted figures show that rental growth stalled at 0% in Q4, with real rents pushed into negative territory in several markets due to elevated inflation.

    Knight Frank's global head of research, Liam Bailey, expects the current period of negative real growth to be short-lived, citing moderate global inflation and strong demand amid supply constraints. He predicts rental growth will remain positive but below trend this year, before returning to stronger growth as demand continues to outpace supply over the longer term.