by Brianna Crandall — July 24, 2015—London’s West End continued to be the world’s highest-priced office market, but Asia dominated the world’s most expensive office locations, accounting for four of the top five markets, according to CBRE Research’s semi-annual Global Prime Office Occupancy Costs survey.
The study also found that the real estate recovery in the Emerald Isle (Ireland) remained on track, with Dublin (26.1%) and Belfast (13.3%) showing the largest and fourth-largest year-over-year prime occupancy cost increases, respectively, among the 127 cities surveyed. In North America, real estate fundamentals remained strong, with Seattle (Downtown), San Francisco (Peninsula) and Vancouver (Suburban) among the 10 markets with the fastest growing prime occupancy costs.
London West End’s overall prime occupancy costs of U.S.$267 per sq. ft. per year topped the “most expensive” list. Hong Kong (Central) followed with total prime occupancy costs of $254 per sq. ft., while Beijing (Finance Street) ($196 per sq. ft.), Beijing (Central Business District [CBD]) ($188 per sq. ft.), and New Delhi (Connaught Place—CBD) ($157 per sq. ft.) rounded out the top five.
The change in prime office occupancy costs mirrored the gradual recovery of the global economy. Global prime office occupancy costs rose 2.0% year-over-year, with the Americas up 2.9%, Europe/Middle East/Africa (EMEA) rising 1.5%, and Asia Pacific up 1.4%.
“Occupier caution has declined, and corporate confidence has been on the rise, and this confidence is starting to translate into a degree of expansionary momentum,” said Richard Barkham, Global Chief Economist, CBRE. “At the same time, many office markets are increasingly short of the quality, modern, flexible and highly accessible or CBD-located office buildings which corporations are seeking to execute workplace strategies that will drive productivity and attract or retain talent.”
CBRE tracks occupancy costs for prime office space in 127 markets around the globe. Of the top 50 “most expensive” markets, 19 were in EMEA, 20 were in Asia Pacific, and 11 were in the Americas.
Americas
In the USA, the general economic recovery has boosted demand for office space across most metros despite structural shifts, of which the reduction of space per worker is the most important. Overall, occupier activity has sustained last year’s momentum, leading to an increase in occupancy costs in 19 out of 22 U.S. markets covered in this survey. The fall in the price of oil has impacted Canada, leading to 2015 gross domestic product (GDP) forecast downgrades. Most Latin American economies continued to perform below trend, resulting in weak occupational activity.
Four American markets recorded double-digit increases in prime occupancy costs in Q1 2015. New York Midtown, the 10th most expensive market in the world, remained the most expensive Americas market, with a prime office occupancy cost of $127 per sq. ft. Rio de Janeiro remained the most expensive market in Latin America, posting an office occupancy cost of US$76 per sq. ft. and ranking as the 31st most expensive market globally.
Top 10 Most Expensive Markets
(Ranked by cost in U.S.$ per sq. ft. per annum)
- London – Central (West End), United Kingdom (267.14)
- Hong Kong (Central), Hong Kong (254.23)
- Beijing (Finance Street), China (195.82)
- Beijing (CBD), China (187.54)
- New Delhi (Connaught Place – CBD), India (156.96)
- Hong Kong (West Kowloon), Hong Kong (150.26)
- Tokyo (Marunouchi Otemachi), Japan (142.78)
- London – Central (City), United Kingdom (142.72)
- Moscow, Russian Federation (128.10)
- New York (Midtown Manhattan), USA (127.00)
Annual Changes Occupancy Costs (In local currency and measure)
Top 5 Increases (% Change)
- Dublin, Ireland (26.1)
- Seattle (Downtown), USA (22.2)
- Panama City, Panama (17.6)
- Belfast, United Kingdom (13.3)
- Helsinki, Finland (12.1)
Top 5 Decreases (% Change)
- Moscow, Russian Federation (-22.4)
- Buenos Aires, Argentina (-10.8)
- Monterrey, Mexico (-6.7)
- Hong Kong (West Kowloon), Hong Kong (-6.6)
- Calgary (Downtown), Canada (-4.9)
