NEW YORK: The rent is due, the rankings are out and it’s another year at the top for Hong Kong, the most expensive office market in the world.
Occupancy costs -- which include rent, local taxes and service charges -- for the city’s notoriously pricey Central district are 30% higher than in London’s West End, which took the No.2 spot in a survey by CBRE Group Inc of prime office real estate in the first quarter.
This is the third year in a row that Hong Kong’s Central district has outstripped its peers in the survey. Its pricing power has helped spur a spate of deals, with mainland Chinese and domestic investors alike scooping up properties for record-breaking sums.
Last week, Swire Properties Ltd sold its stakes in two Hong Kong office towers to a local businessman for HK$15 billion ($1.91 billion).
This isn’t the first time midtown Manhattan, for all its prestige, has failed to make the top five. It was the third-most-expensive market in last year’s report but ninth in 2016. This time around, Midtown was third among the top decliners, after Dubai and Shanghai (Puxi).
Meanwhile, businesses leasing prime space south of Midtown are paying more than ever at $172 a square foot, up 10% from a year earlier. Midtown South, which stretches roughly from 35th Street down to Canal Street, includes landmarks such as the Empire State Building.
Globally, the cost of prime office space rose 2.4% in the first quarter from a year earlier, driven by strong economic growth. Demand from finance, technology and e-commerce tenants played an especially important role in the list of top gainers: Durban, South Africa; Bangkok; Marseille, France; downtown Vancouver; and Oslo.
Occupancy costs in the Americas rose 3.2%, with downtown Vancouver leading the pack. The markets of Europe, the Middle East and Africa followed, at 2%, while Asia-Pacific had a 1.7% gain.
For the first time in the current economic cycle, growth in all three regions is above the usual trends, CBRE Global Chief Economist Richard Barkham said.
“While occupancy-cost growth in the Americas slowed slightly compared to a year earlier, it remains the region with the overall largest increase in costs,” Mr Barkham said. “We expect global office-occupancy costs to increase by approximately 2% in the year ahead.”