London unseats Hong Kong as costliest office market
Print Edition
London’s West End unseated Hong Kong-Central as the world’s highest-priced office market while Asia continued to dominate the world’s most expensive office locations, accounting for four of the top five markets, according to a recent survey released by CBRE Global Research and Consulting.
London’s West End’s overall occupancy costs of US$259.36 per square foot per year topped the “most expensive” list and Hong Kong-Central followed immediately with total occupancy costs of US$234.30, CBRE’s semi-annual Global Prime Office Occupancy Costs survey showed.
Beijing’s Finance Street (US$197.05), Beijing’s Central Business District (US$189.67) and Hong Kong’s West Kowloon (US$170.42) rounded out the top five.
Across the globe, rents rose fastest in the Americas, followed by Asia Pacific and EMEA — Europe, the Middle East and Africa. Overall, the Americas accounted for eight of the 10 markets which saw the fastest growing occupancy costs with Boston (Downtown), Mexico City and San Francisco (Downtown) among the top five.
Globally, occupancy costs rose 2.2 percent for the 12 months ending in the third quarter of 2013, up from the 1.4 percent annual growth rate seen at the end of the first quarter, the survey showed.
“The growth of occupancy costs for prime office space in the past year underscores that even in a slowly recovering economy, demand for the best space in the best locations continues to be strong,” said Raymond Torto, global chairman of CBRE Research, which tracks occupancy costs for prime office space in 126 markets around the globe.
“The appearance of four of China’s prime office markets within the global top 10 and six within the global top 20 reflects both the continued rise of China’s largest cities as essential locations for major corporate occupiers and the current lack of supply of prime offices within those markets,” said Nick Jones, executive director for Office & Agency Services, CBRE China.
“The appearance of Beijing’s Finance Street and Central Business District within the global top 5 is a case-in-point, whereby historically high occupancy costs are being supported by relatively buoyant domestic and international occupier demand and a continuing lack of available prime offices — a trend that is set to continue for the next two years or so until the first new office buildings within the expanded CBD start to complete and enter the market,” Jones said.
Asia-Pacific saw 20 markets ranked in the top 50 most expensive, including six of the top 10: Hong Kong Central, Beijing’s Finance Street, Beijing’s CBD, Hong Kong-West Kowloon, New Delhi’s Connaught Place CBD and Tokyo (Marunouchi/Otemachi). Shanghai Pudong (US$119.50) and Shanghai Puxi (US$111.69) entered Top 15 and Guangzhou (US$74.84) ranked 34th on the list.
Several key Asia markets have a limited supply of prime office space, which are in demand by major institutions, often large multinational or financial services firms. Competition for this limited prime space has driven prime occupancy costs higher.
Though Hong Kong-Central, at US$234.30 per square foot per annum, dropped to second place, it remained the only market in the world other than London’s West End with a yearly occupancy cost exceeding US$200 per square foot. The cautious approach to decision-making by large occupiers, coupled with a vacancy rate higher than most other districts in Hong Kong, has pressured Central landlords to become more flexible in rental negotiations. As a result, occupancy costs have dropped 4.7 percent on a local currency basis over the past 12 months.
The most expensive market in the global ranking from the Pacific Region was Sydney (US$104.39),which came in at 17th.
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