Hong Kong Central: The World’s Priciest Office Market
Hong Kong Central is the most expensive office market in the world, but the city also offers the biggest rental discounts globally in alternative business districts.
Hong Kong Central has again topped the charts as the world's most expensive premium office rental market. Just one square foot in the CBD will set you back an average of USD 323 per year. Demand from mainland Chinese firms is the driving force behind the high rents. We expect this to continue, and forecast overall Grade A office rentals to grow up to 5% in 2018.
Another key factor in Hong Kong's No. 1 ranking is the ongoing tight supply of Grade A office space, which pushed up rents territory-wide by 4.4% year-on-year in Q3 2017.
According to our latest Premium Office Rent Tracker (PORT) report, premium office rents in Central are over 50% more expensive than those in New York’s Midtown and London’s West End, the second and third most expensive locations globally. Central prices are more than double Silicon Valley’s, where premium office space costs USD 158 psf per year. What’s more, Central commands three times the average rental in Asia Pacific and is 10 times more expensive than Kuala Lumpur—the most affordable city on our index at USD 30 psf per year.
There are options for companies wanting to avoid paying such premiums, however. While Central's office rents are the highest in the world, Hong Kong also has the steepest rental gradients globally with a 64% cost discount between Central and non-core business districts such as Hong Kong East.
"There is no shortage of cost saving measures and quality office space in this city. This helps Hong Kong maintain its competitiveness," points out Alex Barnes, our Head of Hong Kong Markets.
Our Head of Research in Hong Kong, Denis Ma, agrees. "Companies seeking more affordable office locations outside Central has become a trend," he says.
Greater China accounts for five of the global top 10 most expensive office markets: Hong Kong Central, Beijing Finance St, Beijing Central Business District, Shenzhen and Shanghai Pudong. Adding Delhi and Tokyo Marunouchi into the mix, seven of the world's ten most expensive locations are in Asia Pacific.
Technology-rich cities rank among the world's most expensive office markets, namely New York, Silicon Valley, San Francisco, Boston, London, Stockholm, Beijing, Shenzhen and Tokyo. The technology sector is increasingly taking up space in premium buildings to attract top talent.
Worldwide, occupancy costs for premium buildings in major office markets rose by an average of 4% in US dollar terms during 2017. We anticipate rent growth will slow in 2018, but there are very few major markets where a downward price correction is on the horizon.
The supply of premium space globally is gradually increasing, but overall vacancy remains in low single digits—it sits at just 3% in Tokyo's central business district and 5% in Hong Kong and London.
So what are today's companies looking for? The strongest demand is for well-located offices with access to excellent amenities, transportation networks, and technology infrastructure and talent hotspots. Corporate occupiers have also shifted their focus to space that facilitates innovation and collaboration, preparing their businesses for the future of work and a new generation of talent.