Hong Kong is once again the world’s highest-priced office market according to CBRE’s semi-annual Global Prime Office Rents survey. The study also found that markets in the Americas and EMEA showed the most consistent growth in rent.
“Prime rents showed the strongest growth in information technology and media hubs, including Stockholm, Amsterdam, Tel Aviv, New York and Seattle,” said Richard Barkham, global chief economist, CBRE. “Coworking operators have been active in acquiring new space, particularly targeting tenants in tech industries.”
Asia had the three most expensive markets in the world, with Hong Kong holding two of the top three most expensive office markets. Hong Kong’s (Central) overall prime office rent of US$269 per sq. ft. per year was followed by Beijing (Finance Street) (US$174 per sq. ft.), Hong Kong (West Kowloon) (US$164 per sq. ft.), New York (Midtown Manhattan) (US$154 per sq. ft.), Beijing (CBD) (US$152 and London’s West End (US$136 per sq. ft.)
Global prime office rents—which reflect rent, excluding local taxes and service charges for the highest-quality, prime office properties—rose 2.0 percent year-over-year, with the Americas performing the strongest, up 3.4 percent. EMEA was up 1.3 percent and Asia Pacific was up 1.2 percent. CBRE tracks office rents for prime office space in 121 markets around the globe. Of the top 50 most expensive markets, 20 were in Asia Pacific, 18 were in EMEA and 12 were in the Americas.
In North America, New York’s Midtown-South recorded double-digit, year-over-year growth, and Downtown Manhattan and Seattle (Downtown) also placed among the 10 markets with the fastest growing prime office rents.
“In the U.S., economic activity picked up in Q2, benefitted by a weaker dollar and easier financial conditions compared with 2016,” said Mr. Barkham. “Corporate earnings have been strong and have propelled global stock markets, which is generally good for prime office rents.”
Prime rent growth was strongest in the Americas, with three-fourths of the region’s markets in positive territory. This growth was driven primarily by tightening markets and robust demand—conditions that are expected to continue through 2017. Overall, office rents increased in 18 out of 23 U.S. markets covered in the CBRE survey.
However, the Americas also had the largest proportion of declining markets (21 percent), reflecting continued weakness in oil and gas-oriented markets such as Houston.
São Paulo, Brazil was the most expensive market in Latin America, with prime office rent of US$52 per sq. ft. and ranking as the 40th most expensive market globally. Prime office rents in Buenos Aires declined but São Paulo saw a modest increase.
Europe Middle East & Africa (EMEA)
Six of the 10 fastest-growing global markets were in EMEA, supported by robust economic and employment growth and constrained supply. Stockholm saw the strongest prime office rent growth in EMEA at 18.2 percent, tied with Bangkok for the largest increase among the 121 markets surveyed. Belfast (14.3 percent) and Amsterdam (12.5 percent) also saw strong prime rent growth, driven by demand from the banking and finance & professional services sectors and business services and technology, media & telecommunications industries, respectively.
Only five EMEA markets recorded a year-over-year decline in prime office rents, including London’s West End, where weaker employment growth and slower demand from hedge funds and the private equity sector have reduced demand for new space.
Asia Pacific led the list of most expensive prime office rents with seven of the top 10 most expensive markets—Hong Kong (Central), Beijing (Finance Street), Hong Kong (West Kowloon), Beijing (CBD), Tokyo (Marunouchi/Otemachi), Shanghai (Pudong) and New Delhi (Connaught Place - CBD).
Prime rent growth in Asia Pacific averaged 1.2 percent, which was below 2016’s level. Bangkok saw the region’s strongest growth at 18.2 percent, with office demand from a wide variety of businesses. The steep rental rate increase was largely driven by the tight availability of prime office space. Tier 1 cities in China—including Shanghai and Guangzhou—have also seen solid growth, largely driven by demand from domestic occupiers.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.