|London’s West End was the world’s highest-priced office market for the second straight year and Hong Kong Central, Beijing Finance Street, Beijing Central Business District and Hong Kong West Kowloon, took the other four of the top five most expensive spots in the rankings, according to CBRE Research’s semi-annual Global Prime Office Occupancy Costs survey.
London’s West End topped the “most expensive” list, with overall prime occupancy costs of US $273 per sq. ft. per year. Hong Kong (Central) followed, with prime occupancy costs of US $269 per sq. ft. Beijing (Finance Street), at US $191 per sq. ft., Beijing (Central Business District CBD), at US $183 per sq. ft., and Hong Kong (West Kowloon), at US $162 per sq. ft., rounded out the top five.
Prime occupancy costs—which reflect rent, plus local taxes and service charges—increased at a 2.4 percent annual pace globally, as the world economy continued to gradually improve and the service sector, a key bellwether for prime office space, entered its fourth year of expansion, driving healthy demand for space in top-quality properties.
In the Americas, prime occupancy costs increased by 3.1 percent year-over-year, largely thanks to the U.S., where rising office-using employment growth stimulated demand for commercial real estate nationwide, including in some key non-gateway and suburban markets.
Prime occupancy costs in EMEA (Europe, Middle East and Africa) rose 2.2 percent following economic recovery, while costs in Asia Pacific increased by 1.9 percent.
“The global services sector has grown steadily for four years now, which helps to explain the general uplift in office rents and costs we are seeing worldwide,” said Richard Barkham, global chief economist, CBRE. “Despite the fact that some markets have been hit by the China, oil and commodities slowdowns, we expect that most advanced economies will keep growing in 2016 and 2017, which combined with limited availability and relatively muted development levels, will result in moderate 2 percent to 3 percent cost increases.”
CBRE tracks occupancy costs for prime office space in 126 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.
Thirty-three markets in EMEA notched increases in occupancy costs as the region’s economic recovery continued to take hold, with 65 percent of European markets moving up by more than three places in the rankings. Four of the rising markets—Prague, Warsaw, Bucharest, Belgrade—were in Central Europe, which has performed better because of the pick-up in the Eurozone and the benefits it offers in terms of a low-cost location for manufacturing and service sector activity.
Office rent values also significantly increased in several U.K. regional cities, including Manchester, Leeds, Liverpool, Southampton and Belfast, providing evidence of an increasingly positive supply-demand balance for U.K. markets outside London.
Asia Pacific was home to seven of the top 10 most expensive markets globally—Hong Kong (Central), Beijing (Finance Street), Beijing (CBD), Hong Kong (West Kowloon), New Delhi (Connaught Place - CBD), Tokyo (Marunouchi Otemachi) and Shanghai (Pudong).
Shanghai (Pudong) moved into the top 10 globally, rising two places to the ninth spot. Despite the Chinese economic slowdown, demand from financial services firms for prime space in Pudong remains strong and supply remains limited.
Hong Kong (Central) remained the only market in the world—other than London’s West End—with a prime occupancy cost exceeding US $200 per sq. ft. However, there is some evidence that overseas financial services companies are resistant to continued high costs and may be seeking alternatives to a Hong Kong location.
New York (Midtown) retained its spot in 10th place and remained the most expensive Americas market, with a prime office occupancy cost of US $127 per sq. ft.
Tech-focused markets continued to fare well, with Seattle (Downtown) topping the global list of increases in occupancy costs, up 17.3 percent year-over-year, and prime costs continuing to rise in San Francisco despite an increase in the supply of Class A product.
Prime occupancy costs grew in a host of key cities and suburban markets—including Washington, D.C. (Downtown), San Francisco (Peninsula), Seattle (Downtown), Seattle (Suburban), Atlanta (Downtown) and Atlanta (Suburban)—evidencing the growing breadth and depth of the recovery of the office market in the U.S.
In Latin America, Lima, Monterrey, Buenos Aires and Mexico City rose up the ranks, showing that the troubles being felt by Brazil are not typical of the whole region.
Top 10 Most Expensive Markets (In US $ per sq. ft. per annum)
1 London - Central (West End), United Kingdom 272.56
2 Hong Kong (Central), Hong Kong 269.31
3 Beijing (Finance Street), China 190.99
4 Beijing (CBD), China 182.92
5 Hong Kong (West Kowloon), Hong Kong 162.04
6 New Delhi (Connaught Place - CBD), India 151.27
7 Tokyo (Marunouchi Otemachi), Japan 149.04
8 London - Central (City), United Kingdom 148.63
9 Shanghai (Pudong), China 134.86
10 New York (Midtown Manhattan), U.S. 127.00
Largest Annual Changes Occupancy Costs (In local currency and measure)
Rank Market % Change
1 Seattle (Downtown), U.S. 17.3
2 Belfast, United Kingdom 15.2
3 Dublin, Ireland 13.0
4 Stockholm, Sweden 12.1
5 Manchester, United Kingdom 9.4
Top 5 Decreases
Rank Market % Change
1 Moscow, Russian Federation -23.9
2 Calgary (Downtown), Canada -14.4
3 Perth, Australia -9.1
4 Vancouver (Suburban), Canada -7.9
5 Ho Chi Minh City, Vietnam -7.7
Note: The full Top 50 Most Expensive Markets chart is located at the end of this press release.
1. The Global Prime Office Occupancy Costs report is a survey of office occupancy costs for prime office space in 126 cities worldwide.
2. The latest survey provides data on office rents and occupancy costs as of September 30, 2015.
3. The Largest Annual Changes rankings are based upon occupancy costs in local currency and measure. The Most Expensive ranking is based upon occupancy costs in US$ per sq. ft. per annum.
4. The figures given in this release refer to occupancy cost. This represents rent, plus local taxes and service charges. The occupation cost figures have also been adjusted to reflect different measurement practices from market to market.
5. Due to methodology changes, comparisons with figures in previously released reports are not valid.
6. To obtain a full copy of the report or to arrange to speak with a CBRE expert, please contact Robert McGrath ( firstname.lastname@example.org ) or Corey Mirman ( email@example.com ).
Top 50 Most Expensive Office Markets (In US$ per sq. ft. per annum)
Rank (Q3 2015) -- Market -- Occ. Cost Rank (Q1 2015 )
1 London - Central (West End), United Kingdom 272.56 1
2 Hong Kong (Central), Hong Kong 269.31 2
3 Beijing (Finance Street), China 190.99 3
4 Beijing (CBD), China 182.92 4
5 Hong Kong (West Kowloon), Hong Kong 162.04 6
6 New Delhi (Connaught Place - CBD), India 151.27 5
7 Tokyo (Marunouchi Otemachi), Japan 149.04 7
8 London - Central (City), United Kingdom 148.63 8
9 Shanghai (Pudong), China 134.86 11
10 New York (Midtown Manhattan), U.S. 127.00 10
11 Moscow, Russian Federation 125.64 9
12 San Francisco (Downtown), U.S. 116.40 12
13 Shanghai (Puxi), China 108.31 13
14 Paris Ile-de-France, France 103.82 17
15 Boston (Downtown), U.S. 102.50 16
16 Singapore, Singapore 96.22 14
17 Washington, D.C. (Downtown), U.S. 94.73 23
18 Mumbai (Bandra Kurla Complex), India 94.43 15
19 San Francisco (Peninsula), U.S. 93.02 29
20 Dubai, United Arab Emirates 92.57 19
21 Seoul (CBD), South Korea 92.17 18
22 Geneva, Switzerland 91.78 21
23 Shenzhen, China 90.21 20
24 New York (Downtown Manhattan), U.S. 86.36 25
25 Seoul (Yeouido), South Korea 83.31 22
26 Sydney, Australia 82.18 24
27 Istanbul, Turkey 81.58 28
28 Zurich, Switzerland 79.89 27
29 Los Angeles (Suburban), U.S. 79.10 26
30 Manchester, United Kingdom 74.99 34
31 Dublin, Ireland 72.91 43
32 Mumbai (Nariman Point - CBD), India 72.71 30
33 Edinburgh, United Kingdom 71.58 35
34 Guangzhou, China 70.71 33
35 Birmingham, United Kingdom 69.69 37
36 Stockholm, Sweden 68.32 48
37 Aberdeen, United Kingdom 68.17 38
38 Glasgow, United Kingdom 68.17 39
39 Leeds, United Kingdom 65.90 44
40 Mexico City, Mexico 65.18 46
41 Jakarta, Indonesia 65.11 32
42 Bristol, United Kingdom 64.38 41
43 Taipei, Taiwan 63.66 40
44 Houston (Downtown), U.S. 62.95 47
45 Milan, Italy 60.97 49
46 Ho Chi Minh City, Vietnam 60.35 45
47 Frankfurt am Main, Germany 59.55 52
48 Rio de Janeiro, Brazil 58.07 31
49 Perth, Australia 56.33 42
50 Seattle (Downtown), U.S. 56.05 5