Hong Kong - Central remains world’s
most expensive office market; four of five most priciest market in Asia
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Prime Occupancy Cost
Growth is Restrained Overall
Dubai — June 23,
2013 — Dubai’s office space market has topped the
Middle East real estate sector chart and is ranked 25th globally
according to a CBRE Global Research and Consulting’s semi-annual Prime Office Occupancy Costs survey. Dubai’s
overall occupancy cost of US $92.57 per sq. ft. per year is the highest in the
Middle East and 25th globally.
“Despite a high
headline vacancy rate, the availability of quality accommodation within prime
areas of the city is actually limited, particularly when looking for larger
space requirements. The lack of high quality offices in the CBD area has seen
rents start to slowly rise and this trend is expected to continue for the best quality
assets as occupancy rate improves” said, Matthew Green, Head of Research at CBRE
Middle East. Dubai remains the destination of choice for global businesses looking
to enter the region, driven by the prospects of economic, the stable political
environment and a truly world class infrastructure.”
The dominance of Asia
in the world’s most expensive office locations continued, as Hong Kong-Central remained
the highest priced market and four other Asian markets populated the top five,
according to the CBRE survey.
Hong Kong–Central’s
overall occupancy costs of US$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 US$222.58. Beijing’s Finance Street, Beijing’s Jianguomen
CBD and New Delhi’s Connaught Place CBD rounded out the top five.
Other Asia-Pacific
markets in the top ten include Hong Kong-West Kowloon (6th) and Tokyo
(Marunouchi/Otemachi) (8th). New York’s Midtown Manhattan (10th)
returned to the top ten markets for the first time since early 2012, joined by
Moscow (7th) and London’s City (9th).
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.”
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.
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.
Asia Pacific
Asia-Pacific had 21
markets ranked in the top 50 most expensive, including six of the top ten— Hong
Kong Central, Beijing’s Finance Street, Beijing’s Jianguomen CBD, New Delhi’s Connaught
Place CBD, Hong Kong-West Kowloon and Tokyo (Marunouchi/Otemachi).
Hong Kong Central’s
position as the most expensive office market continues to be bolstered by its
status as a leading global financial center. Although financial institutions
have become more cost sensitive, with some considering relocating to less
expensive space outside the CBD, high-quality and premium space is still sought
after, especially by mainland Chinese firms which are increasingly setting up
their offices in Hong Kong (Central) in prestigious buildings.
Asia also had the
markets with both the sharpest annual increase and decrease among the markets
tracked. Jakarta’s 38.9% increase was driven by a substantial recovery in
domestic demand in the wake of Indonesian sovereign debt’s return to
investment-grade status, which energized leveraged investment initiatives and
drove up demand for prime office space across the capital. Singapore experienced
the largest annual decrease worldwide (-16.3%) due, in part, to increases in
both new supply and the availability of lower-priced secondary space. The bulk
of the rental decline occurred in early 2012, with only minimal rental
corrections in the second half of 2012 and in Q1 2013.
The most expensive
market in the global ranking from the Pacific Region was Sydney (US$119.23 per
sq. ft.), which came in at 13th.
Americas
North America was
again led by New York’s Midtown, which posted a prime office occupancy cost of
US$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.
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.
In Latin America,
São Paulo remains the most expensive market, posting an office occupancy cost
of US$118.86 per sq. ft., and ranks as the 14th most expensive market globally.
Europe
Middle East & Africa (EMEA)
In addition to London’s
West End ranking as the world’s second-most expensive market, other markets from
the region in the list’s top ten are Moscow (occupancy cost of US$165.05 per
sq. ft.) and London’s City (US$132.94 per sq. ft.).
Struggling economic
conditions and cost-containment initiatives led to lower demand for office
space and restrained pricing across many Southern European markets including Madrid,
Milan, Rome, Athens and a number of smaller markets such as Valencia and
Oporto.
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