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28 March 2024

Dubai on world's costly offices list

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By Staff

Dubai’s office space market has topped the Middle East real estate sector chart and is ranked 25th globally according to a CBRE Global Research and Consulting’s semi-annual Prime Office Occupancy Costs survey. Dubai’s overall occupancy cost of $92.57 per sq. ft. per year is the highest in the Middle East and 25th globally.

“Despite a high headline vacancy rate, the availability of quality accommodation within prime areas of the city is actually limited, particularly when looking for larger space requirements. The lack of high quality offices in the CBD area has seen rents start to slowly rise and this trend is expected to continue for the best quality assets as occupancy rate improves,” said Matthew Green, Head of Research at CBRE Middle East.

“Dubai remains the destination of choice for global businesses looking to enter the region, driven by the prospects of economic, the stable political environment and a truly world class infrastructure,” he added.

The dominance of Asia in the world’s most expensive office locations continued, as Hong Kong-Central remained the highest priced market and four other Asian markets populated the top five, according to the CBRE survey.

Hong Kong–Central’s overall occupancy costs of $235.23 per sq. ft. per year topped the “most expensive” list for the third consecutive time. London’s West End followed with total occupancy costs of $222.58. Beijing’s Finance Street, Beijing’s Jianguomen CBD and New Delhi’s Connaught Place CBD rounded out the top five. 

Other Asia-Pacific markets in the top ten include Hong Kong-West Kowloon (6th) and Tokyo (Marunouchi/Otemachi) (8th). New York’s Midtown Manhattan (10th) returned to the top ten markets for the first time since early 2012, joined by Moscow (7th) and London’s City (9th).

Globally, occupancy costs rose by a scant 1.4 per cent on a year-over-year basis as modest growth in the Americas and Asia Pacific was partly offset by a slight decrease in recessionary Europe. However, the modest global average uptick masked significant increases in markets like Jakarta, Indonesia and suburban Houston, Texas, which posted increases of 38.9 per cent and 21.2 per cent, respectively.

“While the pace of occupancy cost growth globally has slowed, limited supply of prime space in key core business centers has fueled continuous upward movement of occupancy costs,” said Dr. Raymond Torto, CBRE’s Global Chief Economist. “The most expensive office markets often attract the regional headquarters of large multinational firms that require a prime location in a prestigious building with access to major global and regional transit routes.”

CBRE tracks occupancy costs for prime office space in 127 markets around the globe. Of the top 50 “most expensive” markets, 21 are in Asia-Pacific, 18 are in EMEA and 11 in the Americas.

While comparisons in dollars are affected by currency exchange rates, annual percent change calculations are based upon occupancy costs in local currency and are not influenced by currency changes.

Asia Pacific

Asia-Pacific had 21 markets ranked in the top 50 most expensive, including six of the top ten— Hong Kong Central, Beijing’s Finance Street, Beijing’s Jianguomen CBD, New Delhi’s Connaught Place CBD, Hong Kong-West Kowloon and Tokyo (Marunouchi/Otemachi).

Hong Kong Central’s position as the most expensive office market continues to be bolstered by its status as a leading global financial center. Although financial institutions have become more cost sensitive, with some considering relocating to less expensive space outside the CBD, high-quality and premium space is still sought after, especially by mainland Chinese firms which are increasingly setting up their offices in Hong Kong (Central) in prestigious buildings.

Asia also had the markets with both the sharpest annual increase and decrease among the markets tracked. Jakarta’s 38.9 per cent increase was driven by a substantial recovery in domestic demand in the wake of Indonesian sovereign debt’s return to investment-grade status, which energized leveraged investment initiatives and drove up demand for prime office space across the capital.

Singapore experienced the largest annual decrease worldwide (-16.3 per cent) due, in part, to increases in both new supply and the availability of lower-priced secondary space. The bulk of the rental decline occurred in early 2012, with only minimal rental corrections in the second half of 2012 and in Q1 2013.

The most expensive market in the global ranking from the Pacific Region was Sydney ($119.23 per sq. ft.), which came in at 13th.

Americas

North America was again led by New York’s Midtown, which posted a prime office occupancy cost of US$120.65 per sq. ft., reflecting a 5.6 per cent year-over-year increase. The New York Midtown market jumped to 10th globally, marking its first return to the top ten most expensive office locations since the beginning of 2012, reflecting continued demand for premium space by top tier investment and legal firms.

Energy markets, such as Denver, Calgary and Houston, reported the strongest annual prime office occupancy gains, with Houston’s Suburban and Downtown office markets witnessing significant increases in year-over-year occupancy costs, of 21.2 per cent and 14.9 per cent respectively. High-tech markets also saw rising costs, including San Francisco (Downtown), Boston (Downtown and Suburban), and Seattle (Downtown and Bellevue CBD). Prime costs in Boston’s Downtown surged, rising 15.4 per cent. Across most of the fast-growing energy and high-tech markets, new supply is limited given the requirement of a high level of pre-leasing before any new construction can be financed.

In Latin America, São Paulo remains the most expensive market, posting an office occupancy cost of US$118.86 per sq. ft., and ranks as the 14th most expensive market globally.

Europe Middle East & Africa (EMEA)

In addition to London’s West End ranking as the world’s second-most expensive market, other markets from the region in the list’s top ten are Moscow (occupancy cost of $165.05 per sq. ft.) and London’s City ($132.94 per sq. ft.).

Struggling economic conditions and cost-containment initiatives led to lower demand for office space and restrained pricing across many Southern European markets including Madrid, Milan, Rome, Athens and a number of smaller markets such as Valencia and Oporto.

 

Top Ten Most Expensive Markets

(In US$ per sq. ft. per annum)

Rank

Market

Occ. Cost

     

1

Hong Kong (Central), Hong Kong

235.23

2

London - Central (West End), United Kingdom

222.58

3

Beijing (Finance Street), China

195.07

4

Beijing (CBD), China

187.06

5

New Delhi (Connaught Place - CBD), India

178.96

6

Hong Kong (West Kowloon), Hong Kong

173.90

7

Moscow, Russian Federation

165.05

8

Tokyo (Marunouchi/Otemachi), Japan

161.16

9

London - Central (City), United Kingdom

132.94

10

New York (Midtown Manhattan),U.S.

120.65

 

Largest Annual Changes Occupancy Costs

(In local currency & measure)


Top 5 Increases

Rank

Market

 per cent Change

     

1

Jakarta, Indonesia

38.9

2

Houston (Suburban),U.S.

21.2

3

Boston (Downtown), U.S.

15.4

4

Houston (Downtown), U.S.

14.9

5

Manila, Philippines

14.9

 

Top 5 Decreases

Rank

Market

 per cent Change

     

1

Singapore, Singapore

-16.3

2

Guadalajara, Mexico

-16.1

3

Buenos Aires, Argentina

-11.0

4

Valencia, Spain

-10.3

5

Oporto, Portugal

-9.6

 

 

Top 50 Most Expensive Office Markets as of March 31, 2013

(In $ per sq. ft. per annum)

Rank

 

Market

Occ. Cost

       

1

 

Hong Kong (Central), Hong Kong

235.23

2

 

London - Central (West End), United Kingdom

222.58

3

 

Beijing (Finance Street), China

194.07

4

 

Beijing (Jianguomen - CBD), China

187.06

5

 

New Delhi (Connaught Place - CBD), India

178.96

6

 

Hong Kong (West Kowloon), Hong Kong

173.90

7

 

Moscow, Russian Federation

165.05

8

 

Tokyo (Marunouch/Otemachi), Japan

161.16

9

 

London - Central (City), United Kingdom

132.94

10

 

New York (Midtown Manhattan), U.S.

120.65

11

 

Mumbai (Bandra Kurla Complex), India

119.93

12

 

Paris, France

119.32

13

 

Sydney, Australia

119.23

14

 

São Paulo, Brazil

118.86

15

 

Shanghai (Pudong), China

117.68

16

 

Rio de Janeiro, Brazil

113.06

17

 

Shanghai (Puxi), China

109.21

18

 

Geneva, Switzerland

104.24

19

 

Singapore, Singapore

99.65

20

 

Washington, D.C. (Downtown), U.S.

97.80

21

 

Perth, Australia

97.09

22

 

San Francisco (Downtown), U.S.

96.00

23

 

Boston (Downtown), U.S.

93.75

24

 

Seoul (CBD), South Korea

93.69

25

 

Dubai, United Arab Emirates

92.57

26

 

Mumbai (Nariman Point - CBD), India

90.67

27

 

Zurich, Switzerland

87.11

28

 

Istanbul, Turkey

85.45

29

 

Brisbane, Australia

79.10

30

 

Los Angeles (Suburban), U.S.

79.10

31

 

Seoul (Yeouido), South Korea

77.74

32

 

Stockholm, Sweden

76.65

33

 

New York (Downtown Manhattan), U.S.

74.93

34

 

Caracas, Venezuela

74.66

35

 

Guangzhou, China

73.71

36

 

Milan, Italy

71.31

37

 

Manchester, United Kingdom

69.13

38

 

Aberdeen, United Kingdom

67.99

39

 

Edinburgh, United Kingdom

67.61

40

 

Taipei, Taiwan

67.60

41

 

Oslo, Norway

67.07

42

 

Birmingham, United Kingdom

66.39

43

 

Frankfurt, Germany

66.06

44

 

Ho Chi Minh City, Vietnam

64.90

45

 

Bristol, United Kingdom

63.05

46

 

Jakarta, Indonesia

62.50

47

 

Glasgow, United Kingdom

62.29

48

 

San Francisco (Peninsula), U.S.

62.10

49

 

Melbourne, Australia

61.89

50

 

Toronto (Downtown), Canada

61.40

 

Source: CBRE Global Research and Consulting, Q1 2013.