Hong Kong-Central Still the Priciest Market on the Planet

HONG KONG-The dominance of Asia in the arena of the world's most expensive office locations continues, as Hong Kong-Central remains the highest-priced market and four other Asian markets populate the top five. This is according to CBRE Global Research and Consulting's semi-annual Prime Office Occupancy Costs survey.

Hong Kong–Central's overall occupancy costs of $235.23 per square feet per year topped the “most expensive” list for the third consecutive period. London's West End followed with total occupancy costs of $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 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.

Americas

North America was again led by New York's Midtown, which posted a prime office occupancy cost of $120.65 per square foot, 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.

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.

Top Ten Most Expensive Markets

(In US$ per sq. ft. per annum)