A new report comparing global office rents found that two of the world’s five most expensive areas to lease an office are in Beijing, while Hong Kong continues to lead in rental pricing.
The latest edition of CBRE’s semi-annual Prime Office Occupancy Costs survey was published on Friday, and the results for Beijing showed average leasing rates per square foot per year in the city’s Jianguomen (Finance Street) area reaching the equivalent of US$195.07, which ranked third worldwide. In fourth place was the capital’s CBD where rents reached US$187.06 per square foot per year.
In Hong Kong’s Central district, which topped the list, overall occupancy costs for prime grade offices were rated at an average of US$235.23 per square foot per year. This was the third consecutive time that Central ranked highest for office pricing.
When the report was published on July 16th last year, Beijing’s CBD ranked fourth worldwide at US$180.76 per square foot per year, and Jianguomen ranked sixth at US$166.89 per square foot.
Other Asia-Pacific markets in the top ten this year include New Delhi’s Connaught Place (5th), West Kowloon in Hong Kong (6th) and Tokyo’s Marunouchi/Otemachi area (8th).
In a sign of the economic rebound in the US, New York’s Midtown Manhattan ranked (10th), returning the Big Apple to the top ten markets for the first time since early 2012.
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 Dr. 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.”
According to the survey, of the top 50 most expensive markets worldwide, 21 are in Asia-Pacific.
From the analysis in the report, part of the reason for Hong Kong’s continuing status atop the ranks is that, although financial institutions that typically occupy much of the city’s downtown have become more cost sensitive, the expansion of mainland Chinese firms into the city’s prime space is helping to keep prices buoyant.
Asia also had the markets with both the sharpest annual increase and decrease among the markets tracked. Jakarta’s 38.9% increase was driven by a substantial recovery in domestic demand in the wake of Indonesian sovereign debt’s return to investment-grade status, which energized leveraged investment initiatives and drove up demand for prime office space across the capital.
Singapore experienced the largest annual decrease worldwide (-16.3%) due, in part, to increases in both new supply and the availability of lower-priced secondary space. The bulk of the rental decline occurred in early 2012, with only minimal rental corrections in the second half of 2012 and in Q1 2013.