Hong Kong’s Central district remained the most expensive place in the world for premium office rental costs as of the end of the third quarter, with the district’s rents far ahead of the second city on the list, New York, and three times as expensive as Singapore.
Hong Kong topped the list for the fourth straight year, according to global property firm JLL. In tallying average costs, JLL took into account rent, taxes and service charges. The study pegged Central district’s premium rental costs at an average of $338 per square foot annually, nearly 60 percent ahead of New York’s Midtown, which averaged $212.
London’s West End was third, at an average of $195, followed by Beijing’s Finance Street, at $189, and New York’s Midtown South, at $182.
Asia Places Six Cities in Top 10
Of the top 10 most expensive premium rental locales, six were in Asia, including Shenzhen, Beijing’s Central Business District, Tokyo’s Marunouchi, and Delhi’s Connaught Place.
Hong Kong’s Eastern district rose to 12th place, while Kowloon East was in 31st place.
Singapore was in 16th place, at a relative bargain of $108 per square foot annually. At the bottom of the 72-market, 61-city list was Johannesburg, at just $20 per square foot.
Mainland Firms Driving Demand
JLL said demand in Hong Kong’s Central was still being driven by mainland Chinese firms seeking Grade A office space, although the demand had decreased slightly in the third quarter, with more companies seeking to move out of Central to more affordable locations.
“Hong Kong East and Kowloon East have emerged as favoured alternatives,” JLL said. “Notable tenants who have shifted to Hong Kong East recently include Ernst & Young and Baker McKenzie.” It said premium rent in Hong Kong East are 64 percent lower than in Central, with those in Kowloon East 76 percent lower. The two districts are increasingly attracting finance, insurance and other business services firms, as well as tech companies, JLL’s Head of Research for Hong Kong, Denis Ma said in a statement.
Banks and Financial Firms Top Premium Office Space Users
Banking and financial services firms are still the top occupiers of premium offices around the world, and especially in Asia, JLL said.
“High-value, high-margin businesses in financial services such as private, corporate and investment banking firms, rent premium office space in Beijing, Shanghai, Tokyo and Singapore. While cost remains a key factor, these companies prioritise access to talent and the need for amenities when selecting their next office location.”
JLL also said, however, that New York’s Midtown was closing the gap on Hong Kong’s Central on the strength of the US economy. The gap between the two narrowed by six percentage points in the 12 months to September 2018, according to a JLL, with Central’s annual rental growth of 4.6 percent about half of Midtown’s 9.3 percent growth rate.
Rental growth in Hong Kong had slowed, JLL said, “against weakening mainland Chinese demand and a shaky stock market, with growth being supported only because of extremely tight vacancy rates in Central.”
Although premium office rents in Hong Kong were at the top of the global list and Singapore trailed far behind in 16th, another recently released study put Singapore ahead of Hong Kong on the global list in terms of luxury living. A Julius Baer report tracking luxury expenditures of high-net-worth individuals in Asia, released this week, had Shanghai at the top of the list, followed by Singapore and Hong Kong.