CBRE: Global Office Occupancy Costs Still on the Rise

Spurred by tenants’ desire to attract and retain the best-of-the-best, average occupancy costs for premier office space increased 3.6 percent over a 12-month period, according to a new CBRE report.
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Around the world, office users are paying more money for premier office space, according to CBRE’s 2019 Global Prime Office Occupancy Costs report. The average price of top-of-the-line accommodations increased by 3.6 percent in the 12-month period ending at the close of the first quarter of this year, marking a notable increase from the 2.4 percent increase recorded in the same period ending in the first quarter of 2018.

Of the 122 markets CBRE surveyed, a whopping 85 locations posted an increase in office occupancy costs. The commercial real estate services firm attributes the rise in rates to ongoing economic growth, job gains and a restricted amount of premier office space in certain markets. The jump in office rental rates comes despite slower global economic growth and concerns regarding a U.S.-China trade war.

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This year’s list of the 10 most expensive markets features the same locales, albeit with a few changes in rankings. With an average annual cost of $322 per square foot, Central Hong Kong solidified its position at the top by expanding the gulf between the second spot, which was held again by London’s West End, where rents reached $222.70 per square foot.

Hong Kong’s Kowloon district rose from the fourth position to the third with an average office cost of $208.67 per square foot. Midtown Manhattan, a permanent presence on the top 10, distinguished itself with the largest gain at the top, climbing from the sixth spot to the fourth with an average cost of $196.89 per square foot. Finance Street in Beijing, with an average office rate of $187.77 per square foot, dropped from the third spot to the fifth. Completing the top-10 list are Beijing’s central business district, Midtown South Manhattan, the Marunouchi/Otemachi area in Tokyo, New Delhi’s Connaught Place CBD,-central business district, with London rounding out the bunch in the number-10 spot. 

Paying the price

According to CBRE, tenants are willing to pay more for the best office space predominantly for one main reason: the bid to attract and retain the best talent. A notable 15 of the 122 surveyed markets recorded double-digit gains in office occupancy costs. In Portu, Portugal, the average rental rate for premier office space skyrocketed 24.7 percent year over year. Cape Town, South Africa, posted the second-largest gain at 20.5 percent, followed by Singapore and Budapest with respective increases of 17.3 and 15.5 percent. Palma de Mallorca, Spain and Atlanta’s Buckhead and Midtown areas both experienced a 14.2 percent rise in costs over the 12-month period.