London’s West End and Moscow remain the world’s two most expensive office markets, respectively, while Hong Kong’s CBD, Tokyo’s Inner Central District and Mumbai’s Nariman Point make the top five, according to CB Richard Ellis’s latest office rent research.
The CBRE report tracks world markets with the highest, and fastest-growing, occupancy costs for the 12 months ended September 30, 2008.
The average rate of growth for office occupancy costs among the 172 markets monitored in the survey was 8%, almost double last year’s world inflation rate.
Up 94.6%, Abu Dhabi, United Arab Emirates (UAE) had by far the fastest growing occupancy costs.
The rise in occupancy costs in the UAE over the past 12months has reflected market fundamentals - limited supply of quality office space, and high demand from international firms, primarily law firms, financial institutions, real estate and construction companies.
'Our current perceptions are greatly affected by the current economic malaise and we tend to forget how fast rents and occupancy costs were rising over the last 12 months,' said Dr. Raymond Torto, CBRE’s global chief economist. ‘Clearly the rate of change is generally slowing, and in some markets the pricing direction is down.
The turn in rent trajectory will provide some relief to occupiers and angst to owners. However, unlike previous downturns, which have occurred simultaneously with extensive overbuilding, the real estate market globally today is in a stronger position to weather the difficulties than in the past.’
The report also revealed that Asia Pacific was the fastest growing region among markets in the top 50, at an average rate of 26.2%.
Among these was Ho Chi Minh City, Vietnam, which was up 51.4%.
Multi-national corporation tenants have driven demand for the limited supply of prestige prime office buildings in that city; however Ho Chi Minh City’s rents largely surged in the fourth quarter of 2007 and the first half of 2008.
Perth, Australia, was second in the region and fourth overall, up 45.2%, while Hong Kong’s CBD had the third largest increase in the region and twelth overall, up 29.1%.
Occupancy costs in the six Latin American markets that made the top 50 fastest growing rankings grew an average of 21.5%, with two new cities -Santo Domingo, Dominican Republic, and Lima, Peru -making the list.
São Paulo, Brazil, led the region and was the seventh fastest growing market overall, up 34%. São Paulo’s occupancy cost increase reflects a shortage of prime office space combined with a relatively strong local economy supported by global demand for commodities and a growing middle-class