According to CBRE's latest Global Prime Office Costs report, the western end of London remained the world's most expensive office market, while Asia continued to dominate the world's most costly office locations, accounting for three of the top five markets. adhunter
The survey also found that rents are growing at the highest pace in America, where immobility is continuously improving. Overall, five out of ten markets in the United States have the fastest rising occupancy prices. The markets in consideration were Seattle (Suburban), San Francisco (Downtown), San Francisco (Peninsula), Houston (Suburban) and Houston (Peninsula) (Downtown).
In the "most expensive" category, the average cost of occupation in London West End was US$277 per sq. ft. per year. Hong Kong (Central) finished in second place, with total occupancy expenses of $242 per sq. ft. The top five cities were Peking (Finance Street) (USD 194 per squ. ft.), Beijing (CBD) (USD 187 per squ. ft.) and Moscow (USD 165 per squ. ft.).
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The Americas (increased 3.3%) and Asia Pacific (up 2.3%) led the way with regard to worldwide primary office cost (up 2.9 percent ). Meanwhile, EMEA remained almost flat year-over-year, falling by 0.1%. The geographical results are consistent with current economic trends, which demonstrate that in the previous year the US economy outpaced the EMEA economy. Although the Asia-Pacific economy has been growing most quickly in the three areas, there has also been a broad range of office projects underway, putting downward pressure on costs in important markets.
"Occupancy expenses are expected to increase in the second half of 2014. Although the occupants are still aware of costs, the demand for primary office space continues to increase "Dr. Raymond Torto, Global Chairman of CBRE Research, stated. "There are not enough new buildings to meet demand in most markets, except for a handful in Asia Pacific. As a consequence, market income for primary assets is expected to increase in the coming months, which will increase occupancy expenses in most markets paired with growing costs for operational office buildings."
In 126 markets worldwide CBRE monitors prime office space costs. EMEA has twenty-one of the top fifty 'cheap' markets, twenty in Asia-Pacific and nine in the Americas.
Currency exchange rates impact cost comparisons of occupancy in US dollars. On the other hand, the yearly percentage adjustment in occupancy expenses is in local currency and does not change the currency (except Jakarta, Indonesia where leases are typically written in U.S. dollars, but paid in rupiah, which means the occupancy cost increase is greatly affected by the currency depreciation in Indonesia).
The world's most profitable market was in Europe, the Middle east and Africa (EMEA), with London's West End earning US$277 per square foot per year. The West End vacancy rates are quite low owing to development limitations. The recovery of the UK economy led to a considerable increase in space demand. Throughout 2013 and 2014, along with a shortage of available rooms, this demand has increased premium rents.
One of the top ten market marketplaces in the region includes Moscow ($165 per sq. ft), London City ($154 per sq. ft.) and Paris (US$124 per sq. ft.).
The double-digit decrease in primary Occupancy prices in both Palma de Mallorca, Spain, and Lyon, France, has dropped by 13.0% and 10.8%, respectively, indicating the impact of the persistent eurozone crisis.
Asia Pacific has 20 of the world's 50 most expensive and six of its 10 most expensive markets: Hong Kong, CBD, Beijing, Hong Kong, Connaught Place, Tokyo, and North Delhi (Marunouchi Otemachi).
Hong Kong (Central) has remained the only market on the planet, with an annual occupancy cost above 200 dollars per square foot, apart from London's West End. As new office space is added at a time when occupants are migrating carefully in the sector, Hong Kong (Western Kowloon) slipped from 1 to 6, with occupancy prices decreased by 8.0 percent. Occupancy fees are likely to start in the next several months in both markets.
West Kowloon, only a 10-minute metro ride from Central, currently houses large investment institutions, which has become an ideal location for cost-conscious occupants looking for excellent space close to the financial sector. Leasing in West Kowloon had slowed down in the previous year, but following the Chinese New Year, the demand for smaller areas has grown markedly, despite the low vacancy level of the market making finding appropriate space alternatives difficult for bigger occupants.
Sydney, which ranked 17th in the global ranking, was the most expensive market in the Pacific Region (US$106 per sq. ft. per annum).
High-tech and energy-related companies have posted some of the most significant increases in the annual primary occupancy of Seattle (Suburban), San Francisco (Downtown), San Francisco (Peninsula), Houston (Suburban) and Houston (Downtown) and Seattle (Suburban) has reported an important 19,4% annual increase in cost of occupancy. In these areas, rents have grown as a result of ever tighter market circumstances, the high demand of technology and energy tenants and the low vacancy rates have enabled property owners to boost rents substantially.
New York Midtown, which had the world's 11th largest prime-office occupancy rate of US$121 per square foot, once again dominated the Americas.
Rio de Janeiro remained Latin America's most costly market with an office occupancy cost of US$110 per square-foot and a rate of 13th most expensive worldwide market.