by Brianna Crandall — July 4, 2018 — Hong Kong Central remained the most expensive office market in the world this year, according to global commercial real estate services and investment firm CBRE’s annual Global Prime Office Occupancy Costs report.
Hong Kong Central’s overall prime occupancy costs of US$307 per sq. ft. per year topped the “most expensive” list, followed by London West End (US$235 per sq. ft.), Beijing Finance Street ($201 per sq. ft.), Hong Kong Kowloon ($190 per sq. ft.) and Beijing Central Business District ($189 per sq. ft.).
Global prime office occupancy costs — which reflect rent plus local taxes and service charges for the highest-quality, “prime” office properties — rose 2.4% year-over-year, with the Americas up 3.2%, EMEA (Europe, the Middle East and Africa) up 2% and APAC (Asia Pacific) up 1.7%.
Richard Barkham, global chief economist, CBRE, pointed out:
For the first time in this cycle, prime office occupancy cost growth was consistent across all regions. Global economic growth has stimulated robust leasing activity, particularly in EMEA and APAC. While occupancy cost growth in the Americas slowed slightly compared to a year earlier, it remains the region with the overall largest increase in costs. We expect global office occupancy costs to increase by approximately 2% in the year ahead.
Durban, South Africa, fueled by strong demand from business-process outsourcing companies, had the highest increase in year-over-year occupancy cost overall, followed by Bangkok, Marseille, Vancouver Downtown and Oslo.
Vancouver Downtown showed the largest increase in the Americas, followed by Downtown Manhattan, Toronto Downtown, Los Angeles Suburban, Midtown South Manhattan and Dallas Downtown. Costs in Midtown South Manhattan reached an all-time high as strong demand for premium space continued.
In Asia Pacific, Bangkok had the highest growth, followed by Hong Kong Kowloon, Singapore, Melbourne and Wellington.
Durban, Marseille, Oslo, Stockholm and Berlin led EMEA in occupancy cost growth.
Dubai, Shanghai Puxi, Midtown Manhattan, Moscow and Abu Dhabi saw the largest decreases year-over-year.
Dr. Barkham continued:
The dominant trend among markets with notably rising prime occupancy costs is strong demand from the finance, technology and e-commerce sectors. Markets with declining occupancy costs are primarily affected by supply/demand imbalances resulting from new completions. Since reduced costs due to excess inventory tend to be relatively short-lived, companies looking for space in those markets should move quickly.
Most Expensive Markets
(In US$ per sq. ft. per annum; as of Q1 2018)
|1||Hong Kong (Central), Hong Kong||306.57|
|2||London (West End), United Kingdom||235.01|
|3||Beijing (Finance Street), China||200.91|
|4||Hong Kong (Kowloon), Hong Kong||189.56|
|5||Beijing (CBD), China||189.44|
|6||New York (Midtown Manhattan), U.S.||183.78|
|7||New York (Midtown-South Manhattan), U.S.||171.56|
|8||Tokyo (Marunouchi/Otemachi), Japan||171.49|
|9||New Delhi (Connaught Place – CBD), India||153.26|
|10||London (City), United Kingdom||144.95|
Largest Annual Changes
(In local currency and measure; as of Q1 2018)
Top 5 Increases
|1||Durban, South Africa||21.4|
|4||Vancouver (Downtown), Canada||16.1|
Top 5 Decreases
|1||Dubai, United Arab Emirates||-15.4|
|2||Shanghai (Puxi), China||-12.8|
|3||New York (Midtown Manhattan), U.S.||-9.4|
|4||Moscow, Russian Federation||-7.5|
|5||Abu Dhabi, United Arab Emirates||-7.3|
In comparison with CBRE’s 2017 Global Prime Office Occupancy Costs report (see FMLink article), New York (Midtown Manhattan) dropped a few places from #3 to #6; Beijing (Finance Street), China, dropped out of the Top 10 from #6; Tokyo (Marunouchi/Otemachi), Japan, moved from #7 to #8, switching places with New York (Midtown-South Manhattan); and Shanghai (Pudong), China, dropped out of the Top 10 to be replaced by London (City), UK, at Shanghai’s former spot, #10.
Global real estate services firm Cushman & Wakefield’s comparable office occupancy costs report from December 2017, Office Space Across the World (see FMLink article), also ranked Hong Kong as #1, with London’s West End coming in second. Using proprietary data, C&W ranks occupancy costs per workstation and workplace densities for newly developed or refurbished office space globally.
For the full list of CBRE’s Top 50 Most Expensive Markets, see the Global Prime Office Occupancy Costs 2018: Driven by Rapid Global Growth, Prime Office Occupancy Costs Pick Up Pace report.