The cost to lease prime office space has risen across the globe, in some cases significantly, for the year ending March 31, according to a new report by CBRE. It analyzed 122 markets and found that 85 posted cost increases.
Average costs for leasing the best office space in each market’s best location increased by 3.6% globally in that 12-month period, outpacing the year-earlier gain of 2.4%, according to the report.
Julie Whelan, CBRE Americas Head of Occupier Research, says that 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 coworking companies,” she says in prepared remarks.
The 10 most expensive markets were the same markets as last year, though several have changed positions within the top category. Hong Kong Central and London’s West End 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 in New York City, which climbed to the fourth most expensive market this year from the sixth last year as companies sought prime space in Midtown corridors and the new Hudson Yards mixed-use development.
Fifteen of the 122 markets analyzed 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.
The Americas posted a 3.7% gain, boosted in part by Midtown Manhattan’s climb among the top 10. In addition, Atlanta’s Buckhead and Midtown areas posted a 14.2% increase benefitting from the market’s densification and transit options, making Atlanta the region’s fastest rising market.
Europe, the Middle East and Africa notched a 3.5% gain, with the region claiming four of the world’s five fastest-rising markets. The 24.7% increase in Porto, Portugal, resulted at least partly from relocations and expansions by banking and consumer goods companies.
Asia Pacific registered a 3.3% increase, nearly doubling its growth rate of the prior year. APAC already claims six of the 10 most expensive markets in the world. Singapore made a big move into the top 20 with a 17.3% increase this year.