The latest Knight Frank Global Cities Report 2015 has ranked Sydney fifth among 15 global cities in rental forecasts.

The Global Cities Report 2015 forecasts the effect of 1.1 billion new city dwellers on the office market over the next five years across the world. The research, which tracks prime office markets in 15 global cities (including six in the Asia-Pacific region), forecasts that prime office rents will reach record highs by the end of the decade as a result of the rise in urban living.

The Knight Frank Global Cities Index forecasts growth of 19.9 per cent over the next five years and predicts the index will exceed its pre-GFC peak around mid-2015.

Eight of the 15 global cities including five Asian cities recorded negative growth in office rents based on data spread over five years.

Singapore and Madrid, which were at the bottom of the list between 2009 and 2013, showed the most rental volatility and estimates for 2014 are reflecting strong growth (9.8 per cent and 16.3 per cent, respectively).

Sydney dropped one place to fifth position (second for Asia-Pacific) in the rental forecast period (2015–2019), while Madrid rose to second place in the rental forecasts behind San Francisco, which ‘topped the chart throughout the decade’.

James Roberts, head of commercial research at Knight Frank, connects premium pricing for real estate in cities to the presence of high-value knowledge workers. These are the ‘Global Cities’ and they are rarely ignored by a property investor or developer due to their size.

Knight Frank also predicts that vacancy rates will diminish in all of the top 10 cities globally by 2019, with the average vacancy rate at 6.3 per cent, down from 7.8 per cent in 2014, due to restricted supply of new office stock and heightened demand for commercial space.

Tokyo and London will see vacancy rates drop to just 3.9 per cent and 4.4 per cent, respectively, in 2019, placing them lowest among the 15 global cities.

Matt Whitby, head of research and consulting at Knight Frank Australia adds that technology and IT will be driving the uptake of office space in Australia, as they have done globally.