CBRE Report: World’s Highest Office Rents
The survey covered 34 U.S. markets, 19 of which saw price hikes.
By Gail Kalinoski
Richard Barkham, global chief economist, CBRE
Los Angeles—Three Manhattan submarkets in New York City are among the top 20 most expensive office rent markets in the United States in a new Global Prime Office Rents survey from CBRE Group. The survey named Hong Kong as the world’s highest-priced office market.
The CBRE report, which tracks office rents for prime office space in 121 markets, also found that Chicago had the second fastest-growing prime office rents in the world, with a 19.9 percent increase from 2015 to 2016.
Of the top 50 “most expensive” markets, 20 were in Asia Pacific, 19 were in EMEA and 11 were in the Americas. The survey covered 34 U.S. markets and found that office rents increased in 19 of those 34. Overall, the survey showed prime rents rising in 62 markets, stable in 32 and decreasing in 27. Rents increased on average 2.3 percent around the globe with EMEA having the best average growth, 3.7 percent, followed by APAC and the Americas, both at 1.8 percent.
Hong Kong had two of the top three most expensive office markets with rents in the Central market of $264.3 per square foot and the West Kowloon section coming in at $162.7 per square foot behind Finance Street in Beijing with rents of $178.9. Beijing’s CBD placed fourth on the CBRE list with rents of $156.1 per square foot followed by London’s West End, fifth with $146.1; Midtown Manhattan with rents of $144.4; Tokyo’s Marunouchi/Otemachi market at $127.2; Shanghai’s Pudong market with $117; New Delhi’s Connaught Place–CBD in India came in ninth with $105.5 per square foot and the 10th spot went to Moscow with rents of roughly $101.5.
Of the top five fastest-growing markets, Downtown Chicago was the only U.S. city to make that list with rent growth of 19.9 percent, going from $32.4 in 2015 to $38.8 in 2016. Chicago was second to Belfast, Northern Ireland, which had a 25 percent year-over-year increase due to a severe shortage in prime office space. Stockholm and Berlin were both up about 17 percent, placing third and fourth, respectively, and Dublin rounded out the top 5 with a 13.7 percent increase. Hong Kong’s West Kowloon market had most growth in Asia with a 9.3 percent rent hike, according to CBRE.
“We expect the global economy to pick up momentum with growth boosted by fiscal expansion in the U.S.,” Richard Barkham, global chief economist, CBRE, said in a prepared statement. “Growth was underpinned by positive monetary conditions in Europe and increased government spending in China, both of which are expected to continue.”
In the Americas, Seattle had two markets, suburban Seattle and downtown Seattle that like Chicago, also saw double-digit growth in prime office rents year-over-year, going up 11.6 percent and 11.4 percent, respectively. The CBRE report attributed those rising rents to lack of new construction in Chicago since the recession and increased technology growth in Seattle. The Chicago Tribune also cites low vacancy downtown and a trend of corporations moving back to the city from the suburbs as other reasons for office rent increases. The newspaper also noted that the CBRE report only tracks the best buildings in each market, which in Chicago meant about 14 million square feet of the overall 128 million square feet of office space.
New York’s Midtown South submarket in Manhattan, which has been a hot office market for the past several years, placed 11th on the overall CBRE survey of the Top 50 Most Expensive Office Rent Markets with rent of $95.9 per square foot. Downtown Manhattan placed 17th on that list with rents of $82.2 per square foot, right behind San Francisco, which saw 2016 rents of about $88.6 in the Downtown section. San Francisco’s Peninsula market came in at 23rd with rents of $75.6 per square foot.
Other U.S. markets on the top 50 list were downtown Boston, 21st with rents of $76.3; suburban Los Angeles, 29th with rents of $63.9; Washington, D.C., 31st with $59.5 per square foot rents; and downtown Seattle, 45th with rents of $45.88.
Image courtesy of CBRE
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