by Brianna Crandall — September 18, 2017 — Hong Kong is once again the world’s highest-priced office market according to global commercial real estate services and investment firm CBRE Group’s newly released semi-annual Global Prime Office Rents survey. The study, which provides data on office rents as of June 30, also found that markets in the Americas and EMEA (Europe, the Middle East and Africa) regions showed the most consistent growth in rent.
Richard Barkham, global chief economist, CBRE, pointed out:
Prime rents showed the strongest growth in information technology and media hubs, including Stockholm, Amsterdam, Tel Aviv, New York and Seattle. Coworking operators have been active in acquiring new space, particularly targeting tenants in tech industries.
Asia had the three most expensive markets in the world, with Hong Kong holding two of the top three most expensive office markets. Hong Kong’s (Central) overall prime office rent of US$269 per sq. ft. per year was followed by Beijing (Finance Street) (US$174 per sq. ft.), Hong Kong (West Kowloon) (US$164 per sq. ft.), New York (Midtown Manhattan) (US$154 per sq. ft.), Beijing (CBD) (US$152 and London’s West End (US$136 per sq. ft.)
Global prime office rents — which reflect rent, excluding local taxes and service charges for the highest-quality, prime office properties — rose 2.0 percent year-over-year, with the Americas performing the strongest, up 3.4 percent. EMEA was up 1.3 percent and Asia Pacific was up 1.2 percent.
CBRE tracks office rents for prime office space in 121 markets around the globe. Of the top 50 most expensive markets, 20 were in Asia Pacific, 18 were in EMEA, and 12 were in the Americas.
In North America, New York’s Midtown-South recorded double-digit, year-over-year growth, and Downtown Manhattan and Seattle (Downtown) also placed among the 10 markets with the fastest growing prime office rents.
In the U.S., economic activity picked up in Q2, benefitted by a weaker dollar and easier financial conditions compared with 2016. Corporate earnings have been strong and have propelled global stock markets, which is generally good for prime office rents.
Prime rent growth was strongest in the Americas, with three-fourths of the region’s markets in positive territory. This growth was driven primarily by tightening markets and robust demand — conditions that are expected to continue through 2017. Overall, office rents increased in 18 out of 23 U.S. markets covered in the CBRE survey.
However, the Americas also had the largest proportion of declining markets (21 percent), reflecting continued weakness in oil- and gas-oriented markets such as Houston.
São Paulo, Brazil was the most expensive market in Latin America, with prime office rent of US$52 per sq. ft. and ranking as the 40th most expensive market globally. Prime office rents in Buenos Aires declined, but São Paulo saw a modest increase.
Europe Middle East & Africa (EMEA)
Six of the 10 fastest-growing global markets were in EMEA, supported by robust economic and employment growth and constrained supply. Stockholm saw the strongest prime office rent growth in EMEA at 18.2 percent, tied with Bangkok for the largest increase among the 121 markets surveyed. Belfast (14.3 percent) and Amsterdam (12.5 percent) also saw strong prime rent growth, driven by demand from the banking and finance and professional services sectors and business services and technology, media and telecommunications industries, respectively.
Only five EMEA markets recorded a year-over-year decline in prime office rents, including London’s West End, where weaker employment growth and slower demand from hedge funds and the private equity sector have reduced demand for new space.
Asia Pacific led the list of most expensive prime office rents with seven of the top 10 most expensive markets — Hong Kong (Central), Beijing (Finance Street), Hong Kong (West Kowloon), Beijing (CBD), Tokyo (Marunouchi/Otemachi), Shanghai (Pudong), and New Delhi (Connaught Place – CBD).
Prime rent growth in Asia Pacific averaged 1.2 percent, which was below 2016’s level. Bangkok saw the region’s strongest growth at 18.2 percent, with office demand from a wide variety of businesses. The steep rental rate increase was largely driven by the tight availability of prime office space. Tier 1 cities in China — including Shanghai and Guangzhou — have also seen solid growth, largely driven by demand from domestic occupiers.
The most expensive market in the global ranking from the Pacific Region was Sydney (US$84 per sq. ft.), in 17th place.
The Global Prime Office Rents, H1 2017 report is available to download from the CBRE site upon brief registration. Lists of the results appear below.
Top 50 Most Expensive Office Rent Markets
(In US$ per sq. ft. per annum)
|Rank (Q2 2017)||Market||Prime Rent|
|1||Hong Kong (Central), Hong Kong||269.26|
|2||Beijing (Finance Street), China||174.07|
|3||Hong Kong (West Kowloon), Hong Kong||163.57|
|4||New York (Midtown Manhattan), U.S.||153.50|
|5||Beijing (CBD), China||151.87|
|6||London (West End), United Kingdom||136.38|
|7||Tokyo (Marunouchi/Otemachi), Japan||132.09|
|8||Shanghai (Pudong), China||120.11|
|9||New York (Midtown-South Manhattan), U.S.||113.53|
|10||New Delhi (Connaught Place – CBD), India||110.85|
|11||Shanghai (Puxi), China||97.47|
|13||London (City), United Kingdom||90.27|
|14||Dubai, United Arab Emirates||89.85|
|15||San Francisco (Downtown), U.S.||88.63|
|16||Mumbai (Bandra Kurla Complex), India||84.10|
|18||Moscow, Russian Federation||80.36|
|22||Boston (Downtown), U.S.||77.01|
|23||San Francisco (Peninsula), U.S.||76.44|
|24||New York (Downtown Manhattan), U.S.||75.35|
|25||Los Angeles (Suburban), U.S.||73.83|
|26||Seoul (CBD), South Korea||73.16|
|30||Mumbai (Nariman Point – CBD), India||64.27|
|31||Seoul (Yeouido), South Korea||61.86|
|34||Washington, D.C. (Downtown), U.S.||59.70|
|40||São Paulo, Brazil||51.80|
|41||Mexico City, Mexico||49.96|
|44||Ho Chi Minh City, Vietnam||48.39|
|45||Tel Aviv, Israel||47.93|
|46||Seattle (Downtown), U.S.||47.65|
|50||Seattle (Suburban), U.S.||44.89|
Largest Annual Changes in Prime Office Rents
(In local currency and measure)
Top 5 Increases
|3||Belfast, United Kingdom||14.3|
|5||Palma de Mallorca, Spain||12.5|
Top 5 Decreases
|2||Moscow, Russian Federation||-16.0|
|3||London (West End), United Kingdom||-12.5|
|4||Houston (Downtown), U.S.||-6.9|
Source: CBRE Research, Q2 2017