The annual Prime office occupancy costs survey from CBRE, one of the world’s largest commercial real estate companies, found that six of the ten most expensive cities for office space, per square foot, were in the Asia Pacific region, with square footage in Hong Kong’s central business district reaching US$248.83 (£157.28, €194.68) annually.
Coming in at not-too-close second is London’s West end, with reported average occupancy costs of $220.15 psf, while Tokyo was the third most expensive market, followed by Beijing’s Jianguomen central business district and Moscow.
“The most expensive office markets are increasingly located in dynamic business centres across emerging economies as office occupiers diversify their global footprints in these markets to take advantage of rising incomes and the availability of labour,” said Raymond Torto, CBRE’s global chief economist.
“The most expensive office occupier markets also have a diversified economic base; limited, available institutional quality space; strong currencies and are increasingly located in urban centres.”
Since the survey was completed last year, occupancy costs have increased by an average of 3.6% worldwide, again led by Asia-Pacific which increased by more than twice that at 7.7%. Meanwhile, the Americas increased by 5% on average and Europe, Middle East and Africa at 0.4%.
The most significant gains were in the Beijing Jianguomen CBD, along with Beijing’s Finance Street and Guangzhou, also in China. CBRE said Beijing’s rise was driven by strong demand, particularly from domestic financial institutions, combined with a “lack of available space” in Finance Street.
Modest EMEA rises
Moscow was the only market in EMEA to make the top ten risers, with an annual increase in occupancy costs of 19.1%. This, said CBRE, was primarily driven by strong tenant demand in the CBD area where vacancy is relatively low and new development very limited.
Peter Damesick, EMEA chief economist, CBRE, said: “Despite the economic headwinds being experienced, twice as many office markets in EMEA recorded increases in office occupancy costs than saw declines over the past year.
“However, most the increases that did occur in European markets were fairly modest, and the impact of the Eurozone crisis on occupier demand was evident in a further reduction in occupancy costs in several markets in the European periphery, notably Italy, Spain and Greece. From the international occupier’s perspective, cost reductions in these EMEA markets will enhance their competitiveness as office locations.”
