by Brianna Crandall — July 12, 2013—Asia has continued to dominate the list of the world’s most expensive office locations, as Hong Kong-Central remained the highest priced market and four other Asian markets populated the top five, according to CBRE Global Research and Consulting’s semi-annual Prime Office Occupancy Costs survey. CBRE’s occupancy cost figures represent rent plus local taxes and service charges; they have been adjusted to reflect different measurement practices from market to market.
Hong Kong-Central’s overall occupancy costs of U.S.$235.23 per sq. ft. per year topped the “most expensive” list for the third consecutive time. London’s West End followed with total occupancy costs of $222.58. Beijing’s Finance Street, Beijing’s Jianguomen CBD (Central Business District), and New Delhi’s Connaught Place CBD rounded out the top five. New York’s Midtown Manhattan (10th) returned to the top ten markets for the first time since early 2012.
The global Top Ten Most Expensive Markets (in U.S.$ per sq. ft. per annum occupancy costs) are:
- Hong Kong (Central), Hong Kong: 235.23
- London – Central (West End), United Kingdom: 222.58
- Beijing (Finance Street), China: 195.07
- Beijing (CBD), China: 187.06
- New Delhi (Connaught Place – CBD), India: 178.96
- Hong Kong (West Kowloon), Hong Kong: 173.90
- Moscow, Russian Federation: 65.05
- Tokyo (Marunouchi/Otemachi), Japan: 161.16
- London – Central (City), United Kingdom: 132.94
- New York (Midtown Manhattan), United States: 120.65?
Globally, occupancy costs rose by a scant 1.4% on a year-over-year basis as modest growth in the Americas and Asia Pacific was partly offset by a slight decrease in recessionary Europe. However, the modest global average uptick masked significant increases in markets like Jakarta, Indonesia and suburban Houston, Texas, which posted increases of 38.9% and 21.2%, respectively.
“While the pace of occupancy cost growth globally has slowed, limited supply of prime space in key core business centers has fueled continuous upward movement of occupancy costs,” said Dr. Raymond Torto, CBRE’s Global Chief Economist. “The most expensive office markets often attract the regional headquarters of large multinational firms that require a prime location in a prestigious building with access to major global and regional transit routes.”
North America
North America was again led by New York’s Midtown, which posted a prime office occupancy cost of $120.65 per sq. ft., reflecting a 5.6% year-over-year increase. The New York Midtown market jumped to 10th globally, marking its first return to the top ten most expensive office locations since the beginning of 2012, reflecting continued demand for premium space by top tier investment and legal firms.
U.S. energy markets, such as Denver, Calgary and Houston, reported the strongest annual prime office occupancy gains, with Houston’s Suburban and Downtown office markets witnessing significant increases in year-over-year occupancy costs, of 21.2% and 14.9% respectively. High-tech markets also saw rising costs, including San Francisco (Downtown), Boston (Downtown and Suburban), and Seattle (Downtown and Bellevue CBD). Prime costs in Boston’s Downtown surged, rising 15.4%. Across most of the fast-growing energy and high-tech markets, new supply is limited given the requirement of a high level of pre-leasing before any new construction can be financed, notes CBRE.
CBRE tracks occupancy costs for prime office space in 127 markets around the globe. Of the top 50 “most expensive” markets, 21 are in Asia-Pacific, 18 are in EMEA and 11 in the Americas. CBRE notes that while comparisons in dollars are affected by currency exchange rates, annual percent change calculations are based upon occupancy costs in local currency and are not influenced by currency changes, and says that due to methodology changes, comparisons with figures in previously released reports are not valid. CBRE’s press release about the survey contains a longer summary.
