At about US$151 per sq. ft. per annum, Delhi’s Central Business District (CBD) of Connaught Place was ranked as the sixth most expensive prime office market in the world, according to CBRE Research’s semi-annual Global Prime Office Occupancy Costs survey.
This is drop of one place from the last report rankings. The latest survey provides data on office rents and occupancy costs as of September 30, 2015.
Mumbai’s alternative business district of Bandra–Kurla Complex (BKC) was at the 18th position, and the city’s CBD of Nariman Point was at the 32nd position on the Top 50 rankings for global prime office properties.
Anshuman Magazine, CMD, CBRE South Asia said, “Overall the prime office market in India has been positive during the past few quarters on the back of an improving economic climate. Connaught Place in New Delhi witnessed steady demand from leading corporate real estate occupiers in investment grade buildings, mainly due to its central location.”
London’s West End topped the ‘most expensive’ list, with overall prime occupancy costs of US$273 per sq. ft. per year. Hong Kong (Central) followed, with prime occupancy costs of US$269 per sq. ft. per year Beijing (Finance Street) at US$191 per sq. ft. per year, Beijing (CBD) at US$183 per sq. ft. per year, and Hong Kong (West Kowloon) at US$162 per sq. ft. per year, rounded out the top five. In total, Asia Pacific was home to seven of the top ten most expensive markets globally.
Prime occupancy costs—which reflect rent, plus local taxes and service charges—increased at a 2.4% annual pace globally, as the world economy continued to gradually improve and the service sector, a key bellwether for prime office space, entered its fourth year of expansion, driving healthy demand for space in top-quality properties.
Prime occupancy costs in Asia Pacific increased by 1.9% year-over-year—from 1.4% in Q1 2015—compared to 3.1% growth in the Americas and 2.2% growth in EMEA.
|Top 10 Most Expensive Office Markets|
(In US$ per sq. ft. per annum as of Q3 2015)RankMarketOcc. Cost1London – Central (West End), United Kingdom272.562Hong Kong (Central), Hong Kong269.313Beijing (Finance Street), China190.994Beijing (CBD), China182.925Hong Kong (West Kowloon), Hong Kong162.046New Delhi (Connaught Place – CBD), India151.277Tokyo (Marunouchi Otemachi), Japan149.048London – Central (City), United Kingdom148.639Shanghai (Pudong), China134.8610New York (Midtown Manhattan), U.S.127.00
Source: CBRE Research, Q3 2015
“The global services sector has grown steadily for four years now, which helps to explain the general uplift in office rents and costs we are seeing worldwide,” said Dr Richard Barkham, Global Chief Economist, CBRE. “Despite the fact that some markets have been hit by the China oil and commodities slowdowns, we expect that most advanced economies will keep growing in 2016 and 2017, which combined with limited availability and relatively muted development levels, will result in moderate 2-3% cost increases.”
Dr. Henry Chin, Head of Research, CBRE Asia Pacific, comments, “The TMT sector continues to drive office leasing demand in Asia Pacific, with healthy appetite for prime quality space in search for talents across the region. Domestic financial services companies will also remain the main drivers of leasing activity, although demand will likely moderate after several years of strong growth. Cost saving remains at the top of the occupier agenda with renewals being one of the main themes.”
CBRE tracks occupancy costs for prime office space in 126 markets around the globe. Of the top 50 ’most expensive’ markets, Asia Pacific had the most number of markets featured, with 20 markets ranked.
“China, where the service sector is still expanding, looked relatively stable, with little change in prime costs in most Chinese markets. One of the goals of China’s current economic policy is to expand the service sector—and there is evidence that this is already happening—a secular trend that should support office demand over the long term,” adds Dr Chin.
Hong Kong (Central) remained the only market in the world—other than London’s West End—with a prime occupancy cost exceeding US$200 per sq. ft. per annum However, there is some evidence that overseas financial services companies are resistant to continued high costs and may be seeking alternatives to a Hong Kong location.