London retains lead in global office rents

London’s West End remains the world’s most expensive office market but Asian cities dominate overall with three of the five priciest markets, according to CBRE’s semi-annual office occupancy costs survey.

Although the EMEA region saw little growth in rents in line with its weak economic recovery, Dublin booked the biggest increase globally (up 34.9%), leading the five markets with the strongest hikes.

London West End’s overall prime occupancy costs of $274 (€232) per sq. ft. per year topped the ‘most expensive’ list. The UK capital was followed by Hong Kong (Central) with total prime occupancy costs of $251 per sq. ft., Beijing (Finance Street) with $198 per sq. ft. and Beijing (Central Business District at $189 per sq. ft. Moscow ($165 per sq. ft.) rounded out the top five.

The study also found that prime rents are rising fastest in the Americas, where real estate fundamentals continue to improve. Overall, the US accounted for five of the 10 markets with the fastest growing prime occupancy costs. These markets were Seattle (suburban), San Francisco (peninsula), Boston (suburban), San Francisco (downtown) and Seattle (downtown).

The change in prime office occupancy costs mirrored the multi-speed recovery of the global economy. Occupancy costs rose 2.5% year-on-year on a global basis, led by the Americas (up 4.1%) and Asia Pacific (up 2.8%). The EMEA region was essentially flat, edging up 0.3% year-on-year.

‘We expect the gradual recovery of the global economy to continue, leading to better hiring rates and further reduction in the availability of space across most markets over the near term,’ said Richard Barkham, global chief economist at CBRE. ‘In this environment, we expect occupancy costs to continue rising from current levels, further limiting options for occupiers.’

CBRE tracks occupancy costs for prime office space in 126 markets around the globe. Of the top 50 most expensive markets, 20 were in EMEA, 20 were in Asia Pacific and 10 were in the Americas.