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Moscow has leapfrogged the City of London to become the second most expensive office location in Europe after rents there rocketed 46.2% in one year, reaching EUR 1,025.9 per m² per annum, according to research by NB Real Estate, the commercial property agency, and Oncor International, the global commercial real estate network.

At the peak of its growth, the City of London recorded rents of EUR 890 per m² per annum. The West End of London remains the most expensive office district in Europe as rents rose 22.7% to hit EUR 1,758.6 per m² per annum.

According to NB Real Estate, rental inflation in the Moscow office market is being driven to a significant extent by the Russian commodities boom, whereas the City is much more dependent on the financial services sector, which has reduced its demand for space as a result of the credit crunch.

'This is the first time office rents in Moscow have surpassed the City, and is illustrative of how Russia has become a European economic powerhouse in recent years,' said James Gillett, director of City Agency at NB Real Estate. ' A lot of financial institutions in the City scaled back their requirements for new office space as the credit crisis unfolded. This has taken the edge off strong rental growth earlier in the year. A fall in rental values in the City looks increasingly probable, which will allow Moscow to pull even further ahead.'

The shortage of grade A office space in the City last year pushed rents upwards as potential occupiers competed for limited space, but the credit crisis has turned the tables, with landlords increasingly having to discount space.

According to NB Real Estate, there was very little development of new offices in Russia during the economic crisis of the late 1990s. Since the commodities boom began in 2002, domestic and foreign demand for office space in Moscow has rocketed, and supply has failed to keep pace.