by Brianna Crandall — July 10, 2019 — The rising cost of leasing prime office space accelerated across the globe in the year ending March 31 due to continued economic growth, job gains and limited availability of prime space in certain markets, according to a new report from Los Angeles-based global real estate advisor CBRE. Of the 122 markets tracked by CBRE, 85 registered cost increases.
CBRE’s annual Global Prime Office Occupancy Costs report found that average costs for leasing the best office space in each market’s best location increased by 3.6% globally in that 12-month period, outpacing the year-earlier gain of 2.4%.
The 10 most expensive markets were the same markets as last year, although several have changed positions within the top category. Hong Kong Central ($322 per sq. ft. per year) and London’s West End ($222.70) retained the top two spots, with the former widening the gap between itself and the field. The biggest gainer within the top 10 was Midtown Manhattan ($196.89) in New York City, which climbed to the fourth most expensive market this year from the sixth last year as companies sought prime space in Midtown corridors and the new Hudson Yards mixed-use development.
CBRE defines “prime office occupancy costs” as the cost — rent, local taxes and service charges — to occupy the highest quality office space in each market’s highest-quality location. Prime real estate costs can be a gauge of a market’s high end — and sometimes of the broader market, notes the firm.
Julie Whelan, CBRE Americas head of Occupier Research, stated:
The race to attract and retain talent by securing office environments of the highest quality lost no momentum despite slower economies in some regions and unpredictable trade discussions. In fact, the cost of occupying prime office space rose at a steeper rate as supply remained constrained in some coveted markets. Demand is notably strong from banking, finance, technology and coworking companies.
10 Most Expensive Markets (In US$ per sq. ft. per year; as of Q1 2019)
|Market||Occupancy Cost||Market||Occupancy Cost|
|Hong Kong (Central), Hong Kong||$322.00||Beijing (CBD), China||$177.05|
|London (West End), U.K.||$222.70||New York (Midtown-South Manhattan), U.S.||$169.86|
|Hong Kong (Kowloon), Hong Kong||$208.67||Tokyo (Marunouchi/Otemachi), Japan||$167.82|
|New York (Midtown Manhattan), U.S.||$196.89||New Delhi (Connaught Place – CBD), India||$143.97|
|Beijing (Finance Street), China||$187.77||London (City), U.K.||$139.75|
Fifteen of the 122 markets analyzed by CBRE posted double-digit percentage increases in prime office occupancy costs in the first quarter in comparison to a year earlier. Many share traits including a central location, modern infrastructure and transit options, prime social amenities, and a relative lack of available prime space.
Top 10 Annual Market Increases (In local currency and measure; as of Q1 2019)
|Market||Percentage Increase||Market||Percentage Increase|
|Porto, Portugal||24.7%||Atlanta (Buckhead & Midtown), U.S.||14.2%|
|Cape Town, South Africa||20.5%||Vancouver (Downtown), Canada||12.9%|
|Singapore, Singapore||17.3%||San Francisco (Peninsula), U.S.||12.7%|
|Budapest, Hungary||15.5%||San Francisco (Downtown), U.S.||12.2%|
|Palma de Mallorca, Spain||14.2%||Johannesburg, South Africa||12.0%|
Gains were spread evenly across all regions, with each registering a steeper increase than last year. The Americas posted a 3.7% gain, boosted in part by Midtown Manhattan’s climb among the top 10. In addition, Atlanta’s Buckhead and Midtown areas posted a 14.2% increase benefitting from the market’s densification and transit options, making Atlanta the region’s fastest rising market.
Europe, the Middle East and Africa (EMEA) notched a 3.5% gain, with the region claiming four of the world’s five fastest-rising markets. The 24.7% increase in Porto, Portugal, resulted at least partly from relocations and expansions by banking and consumer goods companies.
Asia Pacific (APAC) registered a 3.3% increase, nearly doubling its growth rate of the prior year. APAC already claims six of the 10 most expensive markets in the world. Singapore made a big move into the top 20 with a 17.3% increase this year.
To read the full 2019 Global Prime Office Occupancy Costs report, visit the CBRE website. The firm notes that the Largest Annual Changes rankings are based upon occupancy costs in local currency and measure, and the Most Expensive ranking is based upon occupancy costs in US$ per sq. ft. per annum. The occupation cost figures have been adjusted to reflect different measurement practices from market to market. Due to methodology changes, comparisons with figures in previously released reports are not valid.
With more than 90,000 employees in 480 offices worldwide, CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.