Eight of ten fastest growing occupancy cost markets in Americas
Dubai 23rd on the list of 50 global office
markets
Dubai — December 19, 2013 — London’s West End unseated Hong Kong-Central as
the world’s highest-priced office market, but Asia continued to dominate the
world’s most expensive office locations, accounting for four of the top five
markets, according to CBRE Global Research
and Consulting’s semi-annual Global
Prime Office Occupancy Costs survey.
The study also found that rents are rising fastest in the
Americas, where real estate fundamentals continue to improve. Overall, the Americas accounted for eight of
the 10 markets with the fastest growing occupancy costs with Boston (Downtown),
Mexico City and San Francisco (Downtown) included among the top five.
Dubai’s office space market was ranked 23rd
globally according to the CBRE report with
occupancy costs in Dubai rated at $92.56 per square ft. per annum which
is significantly cheaper than London, which topped the list as the world's most
expensive office market with overall occupancy costs of $259.36 per square
feet.
Nick Maclean, Managing Director, CBRE Middle East, said,
“Dubai remains the destination of choice for global investors looking to enter
the region. They are primarily driven by the prospects of favorable economic
conditions, stable political environment, a truly world class infrastructure
and a reinvigorated property market. With Dubai winning the rights to host the
World Expo in 2020, real estate, hospitality, transport and infrastructure will
all see substantial new development over the next seven years.”
London’s
West End’s overall occupancy costs of US$259.36 per sq. ft. per year topped the
“most expensive” list. Hong Kong-Central followed with total occupancy costs of
US$234.30. Beijing’s Finance Street, Beijing’s Central Business District (CBD)
and Hong Kong’s West Kowloon rounded out the top five.
Globally,
occupancy costs rose 2.2% for the 12 months ending Q3 2013, up from the 1.4%
annual growth rate seen at the end of Q1 2013. All three of the world’s regions
saw annual growth, led by the Americas, at 4.6%, followed by Asia Pacific, at
3.2%, and EMEA, at 0.4%. This performance reflects the relative strength of the
recovery across global regions.
“The growth
of occupancy costs for prime office space in the past year underscores that
even in a slowly recovering economy, demand for the best space in the best
locations continues to be strong,” said Dr. Raymond Torto, Global Chairman,
CBRE Research.
CBRE tracks
occupancy costs for prime office space in 126 markets around the globe. Of the
top 50 “most expensive” markets, 20 are in Asia Pacific, 19 are in EMEA and 11
are in the Americas.
Occupancy
cost comparisons in U.S. dollars are affected by currency exchange rates.
However, the annual percent change in occupancy costs are in local currency and
are not influenced by currency changes (except Jakarta, Indonesia where leases
are typically written in U.S. dollars, but paid in rupiah, which means the
occupancy cost increase is greatly affected by the currency depreciation in
Indonesia).
Asia
Pacific
Asia-Pacific
had 20 markets ranked in the top 50 most expensive, including six of the top
ten— Hong Kong Central, Beijing’s Finance Street, Beijing’s CBD, Hong Kong-West
Kowloon, New Delhi’s Connaught Place CBD and Tokyo (Marunouchi/Otemachi).
Several key Asia markets have a limited supply of prime office space,
which are in demand by major institutions (often large multinational or
financial services firms); competition for this limited prime space has driven
prime occupancy costs higher.
Though Hong Kong (Central), at US$234.30 per sq. ft. per annum, dropped
to second place, it remained the only market in the world other than London’s
West End with an occupancy cost exceeding $200 per sq. ft. per annum. The
cautious approach to decision-making by large occupiers, coupled with a vacancy
rate higher than most other districts in Hong Kong, has pressured Central landlords
to become more flexible in rental negotiations. As a result, occupancy costs
have dropped 4.7% on a local currency basis over the past 12 months.
The most
expensive market in the global ranking from the Pacific Region was Sydney
(US$104.39 per sq. ft.), which came in at 17th.
Americas
High-tech
markets such as Boston (Downtown), San Francisco (Downtown), and Seattle
(Suburban) reported some of the strongest annual prime office occupancy gains,
with Boston (Downtown) posting a significant 15.4% annual increase in occupancy
costs. Rents in these markets have increased as a result of extremely tight
market conditions, as strong demand from technology tenants, combined with low
vacancy rates, has given landlords leeway to increase rents significantly.
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.
In Latin
America, Rio de Janeiro replaced São Paulo as the most expensive market, posting
an office occupancy cost of US$112.22 per sq. ft. and ranking as the 13th
most expensive market globally. Mexico City reported the strongest annual
increase in occupancy costs in Latin America. Mexico City is in the middle of a
transformation of its skyline, with the market delivering high-quality
buildings with elevated prime rents. This new, high-priced supply, coupled with
strong occupier demand, has led to higher occupancy costs, which were up 14.7%
year-over-year.
Europe
Middle East & Africa (EMEA)
Though EMEA posted the lowest 12-month increase in prime occupancy costs
among global regions, it was home to the world’s most expensive market, with
London – Central (West End), at US$259.36 per sq. ft. per annum. Development
restrictions in core areas of London have contributed to the West End’s low
vacancy rate and placed upward pressure on occupancy costs—which rose 14.3%. At
the same time demand is rising from financial firms, such as hedge fund
managers, which were more willing to pay a premium for prime office space in
the most prestigious areas.
Other
markets from the region in the list’s top ten are Moscow (US$165.05 per sq.
ft.), London’s City (US$142.71 per sq. ft.) and Paris (US$122.10 per sq. ft.).
Palma de Mallorca, Spain, and Valencia, Spain, were the only two markets
globally that posted a double-digit decrease in prime occupancy costs, falling
11.3% and 10.7%, respectively, over the past 12 months, a reflection of the
effects of the lingering Eurozone crisis.
Top
Ten
Most Expensive Markets
Most Expensive Markets
(In
US$ per sq. ft. per annum)
|
Rank
|
Market
|
Occ. Cost
|
|
1
|
London - Central (West End), United Kingdom
|
259.36
|
|
2
|
Hong Kong (Central), Hong Kong
|
234.30
|
|
3
|
Beijing (Finance Street), China
|
197.05
|
|
4
|
Beijing (CBD), China
|
189.67
|
|
5
|
Hong Kong (West Kowloon), Hong Kong
|
170.42
|
|
6
|
Moscow, Russian Federation
|
165.05
|
|
7
|
New Delhi
(Connaught Place - CBD), India
|
156.65
|
|
8
|
Tokyo (Marunouchi Otemachi), Japan
|
154.67
|
|
9
|
London - Central (City), United Kingdom
|
142.71
|
|
10
|
Paris, France
|
122.10
|
Largest
Annual Changes
Occupancy Costs
Occupancy Costs
(In
local currency & measure)
Top 5 Increases
Top 5 Increases
|
Rank
|
Market
|
% Change
|
|
1
|
Jakarta, Indonesia
|
76.9
|
|
2
|
Boston (Downtown), U.S.
|
15.4
|
|
3
|
Mexico
City, Mexico
|
14.7
|
|
4
|
London -
Central (West End), United Kingdom
|
14.3
|
|
5
|
San Francisco (Downtown), U.S.
|
13.3
|
Top 5 Decreases
|
Rank
|
Market
|
% Change
|
|
1
|
Palma de Mallorca, Spain
|
-11.3
|
|
2
|
Valencia, Spain
|
-10.7
|
|
3
|
Milan, Italy
|
-7.1
|
|
4
|
São Paulo, Brazil
|
-5.9
|
|
5
|
Mumbai (Nariman Point - CBD), India
|
-5.1
|
Note: The full Top 50 Most Expensive Markets chart is
located at the end of this press release.
Notes to Editors
- The Prime Office Occupancy Costs report is a survey of office occupancy costs for prime office space in 126 cities worldwide.
- The latest survey provides data on office rents and occupancy costs as of September 30, 2013.
- 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.
- 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.
- Due to methodology changes, comparisons with figures in previously released reports are not valid.
Top 50 Most Expensive
Office Markets as of September 30, 2013
(In US$ per sq. ft. per
annum)
|
Rank
|
Market
|
Occ. Cost
|
|
1
|
London - Central (West End), United Kingdom
|
259.36
|
|
2
|
Hong Kong (Central), Hong Kong
|
234.30
|
|
3
|
Beijing (Finance Street), China
|
197.05
|
|
4
|
Beijing
(CBD), China
|
189.67
|
|
5
|
Hong Kong (West Kowloon), Hong Kong
|
170.42
|
|
6
|
Moscow, Russian Federation
|
165.05
|
|
7
|
New Delhi (Connaught Place - CBD), India
|
156.65
|
|
8
|
Tokyo (Marunouchi Otemachi), Japan
|
154.67
|
|
9
|
London - Central (City), United Kingdom
|
142.71
|
|
10
|
Paris, France
|
122.10
|
|
11
|
New York
(Midtown Manhattan), U.S.
|
120.65
|
|
12
|
Shanghai (Pudong), China
|
119.50
|
|
13
|
Rio de
Janeiro, Brazil
|
112.22
|
|
14
|
Shanghai (Puxi), China
|
111.69
|
|
15
|
Mumbai (Bandra Kurla Complex), India
|
109.24
|
|
16
|
São
Paulo, Brazil
|
105.11
|
|
17
|
Sydney,
Australia
|
104.39
|
|
18
|
San
Francisco (Downtown), U.S.
|
102.00
|
|
19
|
Geneva,
Switzerland
|
101.30
|
|
20
|
Singapore, Singapore
|
98.50
|
|
21
|
Seoul (CBD), South Korea
|
97.22
|
|
22
|
Boston
(Downtown), U.S.
|
93.75
|
|
23
|
Dubai,
United Arab Emirates
|
92.56
|
|
24
|
Zurich, Switzerland
|
91.44
|
|
25
|
Istanbul, Turkey
|
86.78
|
|
26
|
Washington,
D.C. (Downtown), U.S.
|
86.47
|
|
27
|
Perth, Australia
|
86.24
|
|
28
|
Seoul
(Yeouido), South Korea
|
83.09
|
|
29
|
New York
(Downtown Manhattan), U.S.
|
82.55
|
|
30
|
Los Angeles (Suburban), U.S.
|
79.10
|
|
31
|
Jakarta, Indonesia
|
78.08
|
|
32
|
Mumbai (Nariman Point - CBD), India
|
77.42
|
|
33
|
Stockholm, Sweden
|
76.16
|
|
34
|
Guangzhou, China
|
74.84
|
|
35
|
Edinburgh, United Kingdom
|
72.86
|
|
36
|
Manchester,
United Kingdom
|
72.86
|
|
37
|
Milan, Italy
|
72.55
|
|
38
|
Aberdeen, United Kingdom
|
72.46
|
|
39
|
Birmingham,
United Kingdom
|
70.76
|
|
40
|
Brisbane, Australia
|
70.20
|
|
41
|
Frankfurt, Germany
|
69.77
|
|
42
|
Bristol, United Kingdom
|
69.62
|
|
43
|
Taipei, Taiwan
|
68.48
|
|
44
|
Oslo, Norway
|
66.93
|
|
45
|
Ho Chi Minh City, Vietnam
|
66.62
|
|
46
|
Glasgow, United Kingdom
|
66.39
|
|
47
|
San
Francisco (Peninsula), U.S.
|
64.40
|
|
48
|
Leeds,
United Kingdom
|
63.15
|
|
49
|
Mexico
City, Mexico
|
62.53
|
|
50
|
Toronto
(Downtown), Canada
|
61.77
|
Source:
CBRE Global Research and Consulting, Q3 2013.
