Porto and Cape Town have the world's largest office rent increases.
According to a new CBRE analysis, the rising cost of leasing premium office space accelerated globally in the year ended March 31, owing to strong economic growth, employment gains, and limited availability of premier space in key cities. CBRE tracked 122 markets, and 85 of them saw cost hikes. service
According to CBRE's annual Global Prime Office Occupancy Costs Report, average costs for leasing the best office space in each market's best location climbed by 3.6 percent over the previous year, exceeding the 2.4 percent increase the year before.
The top ten most expensive markets were unchanged from the previous year, however a few moved up in the rankings. The top two rankings were kept by Hong Kong Central ($322 per sq. ft. per year) and London's West End ($222.70), with the former expanding the gap between itself and the field. Midtown Manhattan ($196.89) in New York City, which surged to the fourth most expensive market this year from sixth last year as corporations sought premium space in Midtown corridors and the new Hudson Yards mixed-use development, was the highest gainer among the top ten.
CBRE defines Prime Office Occupancy Costs as the total cost of occupying the finest quality office space in each market's highest-quality location, including rent, local taxes, and service charges. Prime real estate expenses can serve as a barometer for a market's upper echelon, as well as the larger market.
"Despite sluggish economies in some countries and unclear trade conversations, the competition to attract and retain people by obtaining high-quality office settings gained little traction," Julie, CBRE Americas Head of Occupier Research, said. "In reality, since supply in some sought regions remained tight, the cost of using premier office space increased at a faster rate. Banking, finance, technology, and coworking enterprises are all in high demand."
In the first quarter, fifteen of the 122 markets studied by CBRE saw double-digit percentage increases in prime office occupancy costs compared to a year ago. A central position, modern infrastructure and transit alternatives, top social facilities, and a relative paucity of available prime space are all characteristics shared by many.
Gains were evenly distributed throughout all regions, with each showing a greater gain than the previous year. The Americas gained 3.7 percent, helped in part by Midtown Manhattan's ascension into the top ten. Furthermore, due to the market's densification and transit choices, Atlanta's Bulkhead and Midtown neighborhoods had a 14.2 percent gain, making it the region's fastest increasing market.
Europe, the Middle East, and Africa (EMEA) increased by 3.5 percent, with four of the world's five fastest-growing markets being in the region. The 24.7 percent surge in Porto, Portugal, was fueled in part by banking and consumer goods company relocations and expansions.
Asia Pacific (APAC) saw a 3.3 percent gain, nearly twice its previous year's growth rate. Six of the top ten most expensive markets in the world are in APAC. With a 17.3 percent gain, Singapore jumped into the top 20.