S.F. Top U.S. City in World Office Rankings

For the first time in its history, San Francisco is one of the 10 most expensive office markets in the world, says a report released to GlobeSt.com today by CB Richard Ellis Global Research & Consulting, a business unit of CB Richard Ellis Services.

In the firm’s semi-annual Global 50 Index survey, San Francisco’s buoyant regional economy and skyrocketing technology sector growth pushed occupancy costs for office tenants to all-time highs in the last six months.

It also pushed the city from 29th to ninth on the list of the priciest market in the world. CB Richard Ellis officials said this is first time that a North American city has ranked in the top 10.

The average annual occupancy costs in San Francisco shot up more than 26% to US $64.70 in the first six months of the year. Over the last 12 months, occupancy costs have risen 36%, according to the report.

The strong move by San Francisco moved it ahead of the Midtown Manhattan office market, which remained12th on the list with the average cost for space at $58.50 during the same period.

“We’ve seen a significant premium on occupancy costs in many markets as a result of the rapid expansion in the technology sector, especially within so-called New Economy industries,” said Bill Rothe, Senior Executive Managing Director, CB Richard Ellis Global Research & Consulting. “However, it remains to be seen whether this technology dividend will continue to pay off for office landlords around the world.”

A further symbol of the Bay Area meteoric rise is the Silicon Valley’s move from off the list to 13th. In the last six months, tenants in the technology hotbed have seen occupancy costs shoot up almost 30%.

In the last year, the cost to locate in the Valley has risen 43%, with average occupancy costs now running at US $57.00 per square foot per annum. The result of this growth places the Silicon Valley in 13th position for most expensive market in the world for prime office space.

Still, the Bay Area office is a long way from a No. 1 ranking. CB Richard Ellis’ data again have two Tokyo’s markets, Inner Central and Outer Central, positioned one-two with costs at $155.23 and $134.21, respectively. London and Hong Kong rounded out the top five.

“The technology sector is driving the resurgent office markets in Asia just as much as it is elsewhere in the world,” said Tim Kirkus, CB Richard Ellis Research Director for Asia, expanding on Rothe’s comments. “The true test of these markets will come if – as many observers predict – there is a shakeout in the tech sector and start ups fail or consolidate.”