Hong Kong climbs to world's most expensive office market
Hong Kong climbs to world's most expensive office market
21 June 2016
Melbourne has the highest climb in the rankings of any city globally
Sydney, 21 June 2016 – Hong Kong has become the world’s highest-priced office market and Asia continued to top the list of the world’s most expensive office locations, accounting for four of the top five markets, according to CBRE Research’s latest semi-annual Global Prime Office Occupancy Costs (POOC) survey.
Hong Kong’s (Central) overall prime occupancy costs of US$290 per sq. ft. per year topped the “most expensive” list, displacing London’s West End (US$262 per sq. ft.). Beijing (Finance Street) (US$188 per sq. ft.), Beijing (Central Business District (CBD)) (US$182 per sq. ft.) and Hong Kong (West Kowloon) (US$179 per sq. ft.) rounded out the top five.
Sydney was the highest placed city in Australia, placing 22nd in the rankings. While Perth was the only other Australian city in the Top 50 list, ranking 48th, Melbourne was also in the limelight after moving up 12 places in the rankings - the most of any city globally - to place 62nd.
CBRE’s Head of Research, Australia, Stephen McNabb said the relative performance of Sydney and Melbourne on a global scale was reflective of the blend of performance drivers currently at play across Australia.
“Markets which are exposed to commodity/energy exports are under pressure while those more diversified and less directly exposed to mining are holding up solidly,” Mr McNabb said.
“Sydney in particular, and Melbourne to a lesser extent, have experienced some rent growth over the 12 months captured in the survey and consequently have risen in the POOC ratings. Sydney moved from 26th to 22nd in the Top 50 table, while Melbourne has advanced 12 places. Given the relatively modest rent growth in Melbourne, its advance is most likely reflective of declines from markets previously higher in the rankings.”
Mr McNabb noted that commodity and exporting markets had experienced the largest falls in the POOC survey – including Calgary, Santiago, Houston and Perth, which had experienced the sixth largest global decline over the past 12 months.
The CBRE study also found that the real estate recovery in Ireland continued to gain momentum, with Dublin, which experienced a 50 percent drop in rents during the downturn, showing the second-largest year-over-year prime occupancy cost increase among the 126 cities surveyed (up 16.6 percent year-over-year) -second only to Hong Kong West Kowloon (up 19.5 percent year-over-year).
Global prime office occupancy costs - which reflect rent, plus local taxes and service charges for the highest-quality, “prime” office properties - rose 2.4 percent year-over-year, with the Americas up 2.3 percent, EMEA up 2.1 percent and Asia Pacific up 2.7 percent.
“We expect the global economy to keep growing, and the global service sector, the primary occupier of prime office properties, will continue to expand through periods of volatility, “ said Richard Barkham, global chief economist, CBRE. “Since inflation is low, the growth in prime office occupancy costs is significant for both users and investors.”
CBRE tracks occupancy costs for prime office space in 126 markets around the globe. Of the top 50 “most expensive” markets, 20 were in Asia Pacific, 20 were in EMEA and 10 were in the Americas.
Asia Pacific was home to seven of the top 10 most expensive markets—Hong Kong (Central), Beijing (Finance Street), Beijing (CBD), Hong Kong (West Kowloon), Tokyo (Marunouchi/Otemachi), New Delhi (Connaught Place - CBD), and Shanghai (Pudong).
The service sector will show particularly strong growth in Asia as pensions and insurance products gain market share. So occupancy cost growth will continue to trend upwards at a moderate pace.
Hong Kong (Central) is the only market in the world—other than London’s West End—with a prime occupancy cost exceeding US$200 per sq. ft. Hong Kong Central’s double-digit growth in occupancy costs was fuelled by to two factors: an ultra-low vacancy rate due to lack of new development and continued demand for high-quality space in prime locations by mainland Chinese companies.
The most expensive market in the global ranking from the Pacific Region was Sydney (US$93 per sq. ft)
Notes 1. The Global Prime Office Occupancy Costs report is a survey of office occupancy costs for prime office space in 126 cities worldwide. 2. The latest survey provides data on office rents and occupancy costs as of March 31, 2016. 3. The Largest Annual Changes rankings are based upon occupancy costs in local currency and measure. The Most Expensive ranking is based upon occupancy costs in US$ per sq. ft. per annum. 4. The figures given in this release refer to occupancy cost. This represents rent, plus local taxes and service charges. The occupation cost figures have also been adjusted to reflect different measurement practices from market to market. 5. Due to methodology changes, comparisons with figures in previously released reports are not valid. 6. To obtain a full copy of the report or to arrange to speak with a CBRE expert, please contact Robert McGrath ([email protected]).
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.