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New report from JLL ranks most expensive office rental markets; Asia dominates top five
HONG KONG & MACAU, 25 February 2016 - Hong Kong has the world's costliest office space, according to a new report by property consultancy JLL, beating London to the top spot in the first edition of the company's Global Premium Office Rent Tracker.
Renting a top quality office in Hong Kong will set you back an average of US$262 per square foot per year as strong tenant demand and shortages of premium grade space push prices up. This compares with London, where rents in the best buildings average US$240 per square foot per year. Beijing, which is rapidly extending its global business networks, ranks third at US$199 per square foot per year.
In New York, top rents average US$171 as the technology and media sectors increasingly drive demand. Shanghai ranks fifth globally at $136, supported by the growth of domestic companies.
Alex Barnes, head of Hong Kong markets at JLL, said: "Hong Kong's record rents are a function of a low vacancy, high demand market in Grade A1 buildings in Central. However, with new office supply in districts such as Hong Kong East and Kowloon East at half, to less than a quarter of these rents, there is no shortage of cost saving measures in one of the world's most connected cities. With sustained demand from PRC corporates, we expect Central's Grade A office rents will continue to grow 5-10% this year."
"Our research reveals that three of the top five cities with the costliest office rents are in Asia and half of the top 10 are Asian cities," says Chris Archibold, head of markets at JLL Singapore. "A large part of the global growth is now driven out of Asia and international businesses will continue to be keen to set up their presence in the region; some of these markets have a shortage of supply driving rents northwards. In order to remain competitive from a real estate perspective, these cities will need to ensure a supply of appropriately priced, flexible commercial space."
Competition from several Emerging World Cities is heating up, with China's Alpha cities – Beijing (3rd) and Shanghai (5th) – fast-tracking to maturity and extending their global business networks. This city duo is showing a remarkable capacity to absorb high levels of additional office space, supported by the growth of a new breed of domestic private companies.
Established World Cities such as Singapore (ranked 11th), where new supply is helping affordability, have comparatively lower occupancy costs. In Asia Pacific, Sydney (ranked 20th) with average rents of $60 per square foot per year, also offers significant cost advantages. Other Asia Pacific cities included in the top 10 global rankings are Tokyo and Delhi.
"We are in a new era of city competition, where cities are fighting to secure the world's most dynamic corporations, attract the best talent and pull in capital, both of which are highly mobile," says Megan Walters, head of capital markets research in Asia Pacific. "Nowhere is this intense competition between cities better epitomised than in the demand for premium office buildings in the world's most prestigious commercial office districts."
About the JLL Global Premium Office Rent Tracker
In this first edition, the report's focus is on office occupation costs across 24 cities of differing function and evolution, ranging from Established World Cities (such as New York, London and Tokyo) through to Emerging World Cities (like Shanghai, Moscow and Mumbai) and New World Cities (as typified by San Francisco, Boston and Toronto). The Tracker includes the key elements of occupancy costs – net effective rent, service charges and property tax – all standardised to enable international comparisons.
Click here to download the report.
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