The World’s Priciest Office Markets

By Gail Kalinoski

Richard Barkham, CBRE

Two Manhattan submarkets along with downtown San Francisco and Boston are among the top 20 most expensive office locations in the world in a new Global Prime Office Occupancy Costs report from CBRE Group Inc., that named Hong Kong’s Central submarket and London’s West End as the highest-priced office markets.

The CBRE report, which tracks occupancy costs for prime office space in 121 markets around the globe, found of the top 50 “most expensive markets,” 21 were in Asia Pacific, 16 in EMEA and 13 were in the Americas for the first quarter of 2017.

Rent, Occupancy Trends Across the Globe

The global prime office occupancy costs reflect rent, plus local taxes and service charges for the highest-quality, or “prime” office properties. CBRE Research found the costs rose 1.9 percent overall year-over-year with the Americas up 3.6 percent, EMEA up 0.8 percent and Asia Pacific up 1.2 percent.

“The global top-10 list reflects the ongoing strength of global gateway cities in attracting and maintaining a successful occupier base,” Richard Barkham, global chief economist, CBRE, said in a prepared statement.

Sao Paulo in Brazil, at 35 with an occupancy cost of $69.47, was the only Latin American market in the top 50, the rest of the Americas markets were in the United States. Midtown Manhattan in New York City placed 3^rd with an occupancy cost of $202.79 and Midtown South placed 8^th with an occupancy cost of $156.19. The other U.S. markets making the top 50 were: downtown San Francisco, 14, $112.71; downtown Boston, 16, $102.50; the San Francisco Peninsula, 21, $96.84; downtown Manhattan, 22, $91.18; downtown Washington, D.C., 23, $90.15; suburban Los Angeles, 24, $89.57; downtown Houston, 40, $63.10; downtown Seattle, 43, $61.12; suburban Seattle, 46, $58.35 and downtown Chicago, 48, $57.51.

The report found suburban Denver occupancy costs were up 17.2 percent to $31.40; suburban Houston, up 15.3 percent to $54.26; New York Midtown South, up 14.7 to $156.19; and downtown Chicago, up 10.2 percent to $57.51, in U.S. cities with the largest occupancy-cost increases. However, Buenos Aires showed the biggest increase in the Americas overall with a 20 percent boost to $50.37.

Andrea Cross, CBRE

“The fact that suburban Denver saw the largest occupancy-cost increase in the U.S. affirms what we are seeing across the country—that suburban markets are strengthening in comparison to downtowns. Due to the lack of available, high-quality supply, we expect to see further occupancy and rent gains in many of these suburban markets,” Andrea Cross, CBRE’s Americas Head of Office Research, told Commercial Property Executive.

CBRE’s Chicago office also noted that the occupancy cost increase for Chicago made it the fourth-fastest growing market in the U.S. and the 11^th fastest in the world over a 12-month period as of the first quarter of 2017. It also placed 48^th out of 50 in the world for overall costs.

“The downtown market has been very active the last few years. Demand is still very healthy for high-quality space and we continue to see positive absorption. As long as a flight-to-quality and inbound migration to the urban core continues, I don’t see this trend reversing,” Sara Spicklemire, senior vice president with CBRE in the downtown Chicago office, said in a prepared statement.

Elsewhere around the globe, Durban in South Africa had the highest increase in occupancy costs overall, though Stockholm registered some of the fastest growth in Europe, along with Palma de Mallorca, Spain, and Belfast in the U.K. and Amsterdam in the Netherlands. In Asia Pacific, Shanghai’s Puxi market in China has the highest growth in occupancy costs, followed by Guangzhou, China; Bangalore, India; and Shanghai’s Pudong market in China.

London’s West End market, while still the second most expensive office market in overall costs, did drop 18.5 percent to $213.85 (in U.S.$ per square foot). The CBRE report noted it was “largely due to a fall in rents triggered by more subdued demand, particularly amongst financial occupiers who have become less willing to pay the high rents prevailing in London’s premier market.”

Led by Hong Kong’s Central market at $302.51 per square foot, Asia Pacific had seven of the top 10 most expensive markets in the world: Hong Kong, West Kowloon, 4, $190.02; Beijing’s CBD, 5, $183.10; Beijing Finance Street, 6, $170.29; Tokyo’s Marunouchi/Otemachi market, 7, $161.76; and New Delhi’s Connaught Place–CBD in India, 9, $133.82.