by Brianna Crandall — December 20, 2017 — Cities with a growing technology sector are driving premium office rents up worldwide, with New York, Silicon Valley and London among the top 10 premium office markets globally, according to a new report from JLL, a global specialized real estate services and investment management firm with operations in over 80 countries.
JLL’s latest Premium Office Rent Tracker (PORT), which looks at the “top achievable” rents in spaces over 10,000 square feet in the highest quality building in the premier office district of each city, reveals the market with the most expensive premium office rent in the world is Central in Hong Kong. New York’s Midtown takes the second spot, followed by London’s West End, Beijing’s Finance Street, and Silicon Valley in California. New York was previously ranked behind London.
Jeff Eckert, JLL Managing Director of Agency Leasing, stated:
Technology-rich cities are leading the most expensive office markets globally, including the US tech hubs of New York Midtown, Silicon Valley, San Francisco and Boston; London and Stockholm in Europe; and Beijing, Shenzhen and Tokyo in Asia. The question now becomes how can they remain the top destinations for the next wave of technology firms and start-ups in the face of strong competition from more affordable tech hubs like Amsterdam, Berlin and Seattle?
While cost is a key factor, companies selecting their next office location are prioritizing access to talent, responds JLL International Director Chris Roeder.
Pointing out aspects of buildings in which facilities managers (FMs) are likely to be involved, Roeder remarked:
We continue to see a greater number of companies from the technology sector targeting premium buildings to attract top talent and enhance their brand image. Firms are likely to continue focusing on amenity-rich buildings, in high growth residential areas, with office layouts that have innovative space offerings to make sure they meet employee needs, while driving effectiveness and engagement levels.
While seven out of 10 of the most expensive premium office markets are in Asia, the region’s economic diversity also means that it offers some of the world’s most competitively priced premium space, with Kuala Lumpur, Manila and Bangkok comprising the top three most affordable premium office locations globally.
In the US, the most affordable major office markets are traditionally found in Sun Belt cities such as Houston, Atlanta and Dallas, where an ample supply pipeline has kept occupancy costs down.
In Europe, Warsaw, Brussels, Amsterdam and Berlin offer some of the world’s most affordable office space. These lower-cost markets have attracted substantial corporate interest — leasing volumes in Warsaw and Berlin have risen significantly since 2014, while volume in Amsterdam is at its highest since the Global Financial Crisis in 2008.
JLL’s Premium Office Rent Tracker
In this third edition of PORT, JLL says it compares like-for-like occupation costs across 54 major office markets in 46 cities. The 2017 edition includes a further 19 markets from 2016, where the firm included 35 major markets in 31 cities of differing function and evolution.
Premium office rents refer to the “top achievable” in units over 10,000 square feet in the premium building in the premier office district of each city. In tall buildings, the middle zone is used as the benchmark. The report excludes rents that represent a premium level paid for a small quantity of space or highly prestigious units where a significant premium applies.
Total occupancy costs are calculated by combining the net effective rent (for a mid-zone floor of around 10,000 square feet) with additional costs (e.g. service charges, taxes) in the market’s best-performing building.
According to JLL’s PORT, the Top 10 most expensive premium office rental locations in the world are:
|2017||Cost per square foot (USD)|
|1||Hong Kong, Central||$323|
|2||New York, Midtown||$194|
|3||London, West End||$193|
|4||Beijing, Finance Street||$190|
The Top 10 most affordable premium office rental locations in the world are:
|2017||Cost per square foot (USD)|
|9||La Defense, Paris||$52|
To download JLL’s Premium Office Rent Tracker (PORT) (after filling out a contact form), visit the JLL Web site.