London’s West End was the world’s highest-priced office market for the second consecutive year while Hong Kong Central, Beijing Finance Street Beijing Central Business District and Hong Kong West Kowloon, took four of the top five most expensive spots in the rankings, according to CBRE Research’s semi-annual Global Prime Office Occupancy Costs survey.
London’s West End topped the “most expensive” list, with overall prime occupancy costs of $273/ft2 per year. Hong Kong (Central) followed, with prime occupancy costs of $269 per sq. ft. Beijing (Finance Street), at $191/ft2, Beijing (Central Business District (CBD), at $183/ft2, and Hong Kong (West Kowloon), at $162ft2, rounded out the top five.
Prime occupancy costs - which reflect rent, plus local taxes and service charges - increased at a 2.2% across the EMEA, as the world economy continued to gradually improve and the service sector, a key bellwether for prime office space, entered its fourth year of expansion, driving healthy demand for space in top-quality properties.
“The global services sector has grown steadily for four years now, which helps to explain the general uplift in office rents and costs we are seeing worldwide,” said Richard Barkham, global chief economist, CBRE. “Despite the fact that some markets have been hit by the China, oil and commodities slowdowns, we expect that most advanced economies will keep growing in 2016 and 2017, which combined with limited availability and relatively muted development levels, will result in moderate 2% to 3% cost increases.”
CBRE tracks occupancy costs for prime office space in 126 markets around the globe. Of the top 50 most expensive markets, 19 were in EMEA, 20 were in Asia Pacific and 11 were in the Americas.
Thirty-three markets in EMEA notched increases in occupancy costs as the region’s economic recovery continued to take hold, with 65% of European markets moving up by more than three places in the rankings. Four of the rising markets—Prague, Warsaw, Bucharest, Belgrade—were in Central Europe, which has performed better because of the pick-up in the Eurozone and the benefits it offers in terms of a low-cost location for manufacturing and service sector activity.
Office rent values also significantly increased in several UK regional cities, including Manchester, Leeds, Liverpool, Southampton and Belfast, providing evidence of an increasingly positive supply-demand balance for UK markets outside London.
