Hong Kong dethrones London as world’s most expensive office market

According to the latest report from CBRE, the rising cost of leasing prime office space accelerated across the globe in the year ended March 31 due to continued economic growth, job gains and limited availability of prime space in certain markets. 122 markets were tracked by CBRE, and 85 registered cost increases.

The annual Global Prime Office Occupancy Costs Report found average costs for leasing the best office space in each market's best location increased by 3.6 percent globally in a 12-month period, beating out the gain in 2018 which was 2.4 percent.

The 10 most expensive markets were the same markets as last year, but several have changed positions within the top category. Hong Kong Central ($322 per square feet per year) and London's West End ($222.70) retained the top two spots, with the former widening the gap between itself and the field. The biggest gainer within the top 10 was Midtown Manhattan ($196.89) in New York City, which climbed to the fourth most expensive market up from the sixth in 2018 as companies sought prime space in Midtown corridors and the new Hudson Yards mixed-use development.

CBRE defines Prime Office Occupancy Costs as the cost - rent, local taxes and service charges - to occupy the highest quality office space in each market's highest-quality location. Prime real estate costs can be a gauge of a market's high end - and sometimes of the broader market.

"The race to attract and retain talent by securing office environments of the highest quality lost no momentum despite slower economies in some regions and unpredictable trade discussions," said Julie, CBRE Americas Head of Occupier Research.

"In fact, the cost of occupying prime office space rose at a steeper rate as supply remained constrained in some coveted markets. Demand is notably strong from banking, finance, technology and co-working companies."

Fifteen of the 122 markets analysed by CBRE posted double-digit percentage increases in prime office occupancy costs in the first quarter in comparison to a year earlier. Many share traits including a central location, modern infrastructure and transit options, prime social amenities, and a relative lack of available prime space.

Gains were spread evenly across all regions, with each registering a steeper increase than last year. The Americas posted a 3.7 percent gain, boosted in part by Midtown Manhattan's climb among the top 10. In addition, Atlanta's Bulkhead and Midtown areas posted a 14.2 percent increase benefitting from the market's densification and transit options, making Atlanta the region's fastest rising market.

Europe, the Middle East and Africa (EMEA) notched a 3.5 percent gain, with the region claiming four of the world's five fastest-rising markets. The 24.7 percent increase in Porto, Portugal, resulted at least partly from relocations and expansions by banking and consumer goods companies.

Asia Pacific (APAC) registered a 3.3 percent increase, nearly doubling its growth rate of the prior year. APAC already claims six of the 10 most expensive markets in the world. Singapore also made a big move into the top 20 with a 17.3 percent increase.