LOS ANGELES—It may be home to none of the world's 10 priciest markets in which to rent office space, but the US has a lock on increases in occupancy costs, according to CBRE Research data. Of 13 global office markets with year-over-year cost gains of 10% or greater during the third quarter, seven were in the US, while five of the top 10 and 18 of the 50 largest annual increases globally were experienced by office markets in this country. Among US cities in the 126 office markets CBRE covers globally, only one—suburban Chicago—saw a Y-O-Y decrease.

CBRE ties the regional rate of increases in occupancy cost—which include local taxes and service charges as well as rent—to the relative economic health of each region.  Powered by the US, the Americas saw occupancy costs go up by 4.1% in the past 12 months, while the Asia Pacific region averaged 2.8% Y-O-Y and Europe remained nearly flat at 0.3%.

CBRE notes that in the US, “where the economic recovery has firmly taken hold” and hiring is now broad-based, strong leasing activity led to the highest level of quarterly net absorption since 2007. This drove above-inflation increases in prime occupancy costs for Q3 across all but one major US market covered in CBRE's report. In Europe, by contrast, “buoyant conditions” are largely confined to London, Dublin and the major Nordic markets, while the picture is decidedly mixed across the Asia Pacific region.

That's the case even as London's West End remained the world's priciest office market with occupancy costs of US $273.62 per square foot, more than double the US $120.65 per square foot averaged by Midtown Manhattan, which remains the most expensive office market in the Americas. However, CBRE data show that the West End's 8.5% Y-O-Y increase in occupancy costs barely made the global top 20 for that metric, a group that includes suburban Seattle with a 20.5% increase, the San Francisco peninsula (12.7%), suburban Boston (11.8%), the San Francisco CBD (also 11.8%), downtown Seattle (11%), suburban Washington, DC (10.9%), Lower Manhattan (10.2%), downtown Houston (9.4%) and suburban Houston (8.8%).

“Overall, these growth rates reflected underlying regional economics and supply constraints over the near term,” according to CBRE's semiannual report on global occupancy costs. Further, the fact that only one US market saw a decline in costs, and a relatively small decline at 0.9%, illustrates “the strong momentum currently underway in the US office sector.” Elsewhere in the Americas, all eight of the Latin American cities covered by CBRE showed Y-O-Y occupancy cost declines, while three Canadian markets—downtown Vancouver, suburban Montreal and downtown Toronto—were in the lower third of the top 30 for annual declines.

Commenting on the office sector generally, Richard Barkham, CBRE's London-based global chief economist, says the firm expects “the gradual recovery of the global economy to continue, leading to better hiring rates and further reduction in the availability of space across most markets over the near term.” Amid the current environment, “we expect occupancy costs to continue rising from current levels, further limiting options for occupiers. Technology, quality and flexibility are expected to increasingly come into consideration in space use and location decisions, as occupiers will seek to contain costs and improve productivity.”