Five of the six most expensive office areas in the world are in Asia, as demand by global companies to locate there outstripped the supply, according to a semiannual report released on Thursday by real estate services company CBRE Inc.
For the third consecutive time, Hong Kong's Central business district had the highest overall occupancy cost, which includes local taxes and service charges. Hong Kong's Central averaged $235.23 per square foot annually at the end of March, leading London's West End at $222.58. Beijing's Finance Street followed at $195.07 per square foot with Beijing's central business district right behind at $187.06.
At No. 5 New Delhi's Connaught Place's occupancy cost was $178.96 per square foot with Hong Kong's West Kowloon area at $173.90, according to the report that covers 127 markets around the globe. Even last year, Connaught Place was ranked as the fifth most expensive work place in the world despite offices moving to Gurgaon and Noida.
"Demand is coming from a lot multinational corporations who want to place a stake into these developing economies," said Raymond Torto, CBRE's global chief economist. "When they look around some of these cities, they want to be in the best locations because there's not a lot of good infrastructure. You want to be close to other businesses. You want to be close to transportation. And you want to be in a quality property."
Meanwhile, supply is muted by either height restrictions or ownership in which even in the best buildings separate floors can be owned by different landlords. That restricts opportunities to upgrade a building and can limit the availability of contiguous space, he said.
At No. 7 on the list is Moscow, followed by Tokyo's Marunouchi/Otemachi district and London's Central City, with Midtown Manhattan making 10th place at $120.65 per square foot.
Jakarta saw the biggest increase, with occupancy costs jumping 38.9 percent compared with a year earlier. Two of Houston's office areas also made their way into the top five areas where occupancy costs increased the most. In suburban Houston, occupancy costs jumped 21.2 percent to No. 2. Houston's downtown occupancy costs rose 14.9 percent, fourth behind downtown Boston, where occupancy costs rose 15.4 percent.
Globally, occupancy costs rose by 1.4 percent.