by Brianna Crandall — March 31, 2017 — Hong Kong is the world’s highest-priced office market, according to global commercial real estate services and investment firm CBRE Group’s new Global Prime Office Rents survey, which provides data on office rents as of December 31, 2016. European markets showed the most consistent growth in prime office rent, mostly due to a lack of supply. Belfast (up 25% year-over-year) led the way among the 121 cities surveyed.
Hong Kong had two of the top three most expensive office markets. Hong Kong (Central) held the top spot with prime office rent of US$264 per square foot per year, and Hong Kong (West Kowloon) ($163 per sq. ft.) was third. Rounding out the top five were two Chinese markets — Beijing (Finance Street) ($179 per sq. ft.) at #2 and Beijing (Central Business District (CBD)) ($156 per sq. ft.) at #4 — and London’s West End ($146 per sq. ft.). The most expensive market in North America was New York (Midtown Manhattan), number six on the global list, with a prime office rent of $144 per sq. ft.
Global prime office rents — which reflect rent, excluding local taxes and service charges for the highest-quality, “prime” office properties — rose 2.3% compared with a year earlier for the 12 months ending December 31, 2016, with EMEA up 3.7% and Asia Pacific and the Americas each up 1.8%.
Four of the top five fastest-growing (prime office rents) markets were in Europe, with Stockholm, Berlin and Dublin joining Belfast on the list. Chicago (Downtown), with rent growth of 19.9% was the top market in the Americas and was number two on the global list. Hong Kong (West Kowloon) with a rent rise of 9.3% was the top growth market in Asia.
“We expect the global economy to pick up momentum with growth boosted by fiscal expansion in the U.S.,” said Richard Barkham, global chief economist, CBRE. “Growth was underpinned by positive monetary conditions in Europe and increased government spending in China, both of which are expected to continue.”
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, 19 were in EMEA and 11 were in the Americas.
Europe, Middle East and Africa (EMEA)
Europe saw the strongest rent increase due to low supply and high demand. Stockholm, Berlin and Dublin had significant rent growth. However, rents in London’s West End fell by 6.3% as activity waned in the wake of the Brexit referendum. In Istanbul, rents fell by 11.1%, largely due to political instability in the area.
30 of the 56 EMEA markets recorded a year-over-year increase in prime office rents.
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 1.8% and was strongest in gateway cities. Hong Kong (West Kowloon) led the way at 9.3% due to strong demand from Chinese companies for premium locations and very tight supply conditions. Technology start-ups have played a key role in the fastest-growing markets in Asia Pacific, such as Bangalore, Sydney, Bangkok and Auckland.
The most expensive market in the global ranking from the Pacific Region was Sydney ($78 per sq. ft.), in 20th place.
In the Americas, three markets — Chicago (Downtown), Seattle (Suburban) and Seattle (Downtown) showed double-digit growth in prime office rents year-over-year, due to a lack of new construction in Chicago and technology growth in Seattle.
Several markets dependent on the oil and gas industry experienced lowered prime office rents, including Calgary (Downtown and Suburban), Houston (Downtown) and Denver (Downtown).
Overall, office rents increased in 19 out of 34 U.S. markets covered in this survey.
Mexico City was the most expensive market in Latin America, with prime office rent of $50 per sq. ft. and ranking as the 40th most expensive market globally. Prime office rents in São Paulo declined, but Buenos Aires saw a modest increase.
CBRE’s Global Prime Office Rents survey is available to download upon brief registration.