London’s West End continued to be the world’s highest-priced office market but Asia dominated the world’s most expensive office locations, accounting for four of the top five markets, according toCBRE Research’s semi-annual Global Prime Office Occupancy Costs survey.
The study also found that the real estate recovery in the Emerald Isle (Ireland) remained on track, with Dublin (26.1 percent) and Belfast (13.3 percent) showing the largest and fourth-largest year-over-year prime occupancy cost increases, respectively among the 127 cities surveyed. In North America real estate fundamentals remained strong with Seattle (Downtown), San Francisco (Peninsula) and Vancouver (Suburban) among the 10 markets with the fastest growing prime occupancy costs.
London West End’s overall prime occupancy costs of US$267 per sq. ft. per year topped the “most expensive” list. Hong Kong (Central) followed with total prime occupancy costs of US$254 per sq. ft., Beijing (Finance Street) (US$196 per sq. ft.), Beijing (Central Business District (CBD)) (US$188 per sq. ft.) and New Delhi(Connaught Place –CBD) (US$157 per sq. ft.) rounded out the top five.
The change in prime office occupancy costs mirrored the gradual recovery of the global economy. Global prime office occupancy costs rose 2.0 percent year-over-year, with the Americas up 2.9 percent, EMEA rising 1.5 percent and Asia Pacific up 1.4 percent.
“Occupier caution has declined and corporate confidence has been on the rise and this confidence is starting to translate into a degree of expansionary momentum,“ said Richard Barkham, Global Chief Economist, CBRE. “At the same time, many office markets are increasingly short of the quality, modern, flexible and highly accessible or CBD-located office buildings which corporations are seeking to execute workplace strategies that will drive productivity and attract or retain talent.”
CBRE tracks occupancy costs for prime office space in 127 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.
Europe Middle East & Africa (EMEA)
The continued recovery has led to a revival in leasing activity beyond London and Dublin to UK regional cities and smaller Central and Eastern European markets. The exceptions have been Russian office markets, where Western sanctions and the steep drop in oil prices have led to a deep recession, and Warsaw, where supply levels continue to exert downward pressure on rents. In EMEA, occupiers are starting to switch from cost optimization and space reduction to expansions. Prime office occupancy costs increased by 1.5 percent, as only 11 out of 57 EMEA markets saw a year-over-year decline in occupancy costs.
In addition to London West End, other markets from the region on the global top 10 list are London City (US$143 per sq. ft.) and Moscow (US$128 per sq. ft.).
Asia Pacific had 20 markets ranked in the top 50 most expensive, including six of the top 10—Hong Kong (Central), Beijing (Finance Street), Beijing (CBD), New Delhi (Connaught Place - CBD), Hong Kong (West Kowloon) and Tokyo (Marunouchi Otemachi).
Occupancy cost trends were mixed, with regional surveys showing stronger hiring intentions among employers in India, Taiwan, New Zealand, the Philippines and Japan while corporate hiring activity remained muted in other locations. India and the Philippines continued to benefit from growing IT back office services looking for operational and costs efficiency.
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.
The most expensive market in the global ranking from the Pacific Region was Sydney (US$88 per sq. ft.), in 24th place.
In the U.S., the general economic recovery has boosted demand for office space across most metros despite structural shifts, of which the reduction of space per worker is the most important. Overall, occupier activity has sustained last year’s momentum, leading to an increase in occupancy costs in 19 out of 22 U.S. markets covered in this survey. The fall in the price of oil has impacted Canada leading to 2015 GDP forecast downgrades. Most Latin American economies continued to perform below trend resulting in weak occupational activity.
Four American markets recorded double-digit increases in prime occupancy costs in Q1 2015.
Rio de Janeiro remained the most expensive market in Latin America, posting an office occupancy cost of US$76 per sq. ft. and ranking as the 31st most expensive market globally.
Note: The full Top 50 Most Expensive Markets chart is located at the end of this press release.
- The Global Prime Office Occupancy Costs report is a survey of office occupancy costs for prime office space in 127 cities worldwide.
- The latest survey provides data on office rents and occupancy costs as of March 31, 2015.
- The Largest Annual Changes rankings are based upon occupancy costs in local currency and measure. The Most Expensive ranking is based upon occupancy costs in US$ 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.
- 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).
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.