Office rents in Shanghai are heading up with prices expected to grow 19% by 2020
Hong Kong has been grabbing headlines for having the world’s most expensive office space, but its competitor to the north may be catching up quickly, as Shanghai is now seeing the sharpest rates of increase in prime office rentals, according to a market study published this month.
The annual Skyscraper Index published by Knight Frank as part of its Global Cities report, found that prime office rents in Shanghai grew 7.6 percent during the first six months of this year — the sharpest increase of any major business location worldwide. Office rents in the one-time workers’ paradise are now on par with Singapore for eighth most expensive in the world at $72 per square foot per year, according to the property agency’s survey.
And the mainland commercial centre’s market doesn’t seem to be slowing down, with Knight Frank forecasting that Shanghai’s prime office rents will grow by 19.2 percent between the fourth quarter of 2015 and the end of 2019, which is the sixth highest total out of the 31 cities surveyed by the firm.
Hong Kong Office Rents Remain World’s Most Expensive
$100 million will buy you less than 14,000 sq ft of Hong Kong office space
While Shanghai is on the way up, Hong Kong still reigns as the most expensive place in the world to rent space in a prime office tower. Driven by increasing demand by mainland corporate occupiers, prices in the Asian financial hub increased by 5.9 percent in the first half of this year, and leasing a square foot of prime space in Hong Kong now costs $278.50 annually. Despite its reputation as the Big Apple, Manhattan comes a distant second to Hong Kong for office markets with the rentals in New York City averaging $158 per square foot per year — some 43 percent less than on Hong Kong island.
For occupiers hoping to avoid paying high rents, the report offered little hope. The Skyscraper Index revealed that $100 million could buy 13,966 square feet of prime office space in Hong Kong, while the same amount would purchase 32,694 square feet of prime office space in Tokyo, which was the second most expensive investment market surveyed.
And the future outlook for would-be buyers in Hong Kong doesn’t show any bargains on the way. Knight Frank predicts prime office rents in the city will increase 2-5 percent next year with the city expected to continue to have the world’s most expensive offices for the next three to five years before other cities have the chance to close the gap.
Within Hong Kong, Central currently has the highest Grade-A office rents in Hong Kong, with prices at the gateway to Victoria Harbour having increased by 20 percent during the past two years due to continued supply shortage. The entire city is likely to face a shortage of office space of around two million square feet by 2020, according to Knight Frank.
Singapore Slide Continues
Not even the Merlion can stop Singapore’s office rents from falling
While prime office rents in Singapore are among the top-five most expensive in the world and overall office rents rank eighth globally, according to Knight Frank, these rates are already on their way down in the Lion City.
Singapore’s skyscrapers saw a decline of seven percent in office rents during the first half of the year and this has been partially attributed to significant new supply and a slowdown in the local economy.
This downturn looks set to continue with office rents predicted to decline 14 percent between the fourth quarter of 2015 and the end of the decade. This is the strongest drop in prices in Asia Pacific and only surpassed by Bogota out of the 31 cities surveyed.