Hong Kong is now the most expensive office market in the world, a new report says.
Hong Kong office rents cost the most
Hong Kong is the most expensive city in the world for renting an office, followed closely by London and Tokyo, according to the latest annual survey from the property broker Cushman & Wakefield.
Hong Kong rents jumped 51 per cent last year, as space in the Chinese special administrative zone became more scarce.
"With fierce competition among tenants for limited prime office premises in Hong Kong, it is expected that grade A office rents in the central business district will be driven upwards by 20 to 25 per cent over the next 12 months," said John Siu, the executive director of Cushman's Hong Kong office.
Rents in Hong Kong now fetch US$241 (Dh885) a square foot, Cushman reports. Rents in London's West End are $233 a sq ft, up 27 per cent. Tokyo's central business district was $166 a sq ft.
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Dubai, which was the fourth most expensive city for office rents last year, fell off the list this year as rents dropped with rising vacancy rates and the economic downturn, said David Quinn, the head of Cushman's UAE office.
"There is a lot of office space becoming available," Mr Quinn said. "Landlords have been forced to drop rates to attract tenants."
In the Dubai International Financial Centre, one of the city's most desirable developments, rents have fallen from Dh350 a sq ft to Dh280 a sq ft in the past year, he said. Other projects have seen rents fall more than 30 per cent, Mr Quinn said.
According to the property company Jones Lang LaSalle, more than 40 per cent of office space in Dubai is empty.
The oversupply in Dubai is likely to continue, with "vacancy rates expected to increase through the year across the city, which will assert further downward pressure on rent," the company concluded in a study last month.
Dubai has been replaced on Cushman's global list, which only includes one city in each country, by Abu Dhabi. The UAE capital now stands as the world's 16th most expensive office rental market, although that is likely to change.
Abu Dhabi office rates are expected to slide in the next year, with 540,000 square metres of new office space scheduled to come on line this year.
The biggest rental increases worldwide last year were in China and Brazil, Cushman reported. Rio de Janeiro jumped from 13th to fourth on the list. New York was in fifth place, followed by Mumbai, Moscow, Paris, Zurich and Milan.
Outside the big cities, office markets were far less volatile. Rents increased by only 1 per cent in Europe, while they moved up 8 per cent in the Asia-Pacific region.
"The higher cost of office accommodation is increasingly a global factor for businesses to consider," said Barrie David of Cushman's Global Research Group.
"Tenants also face a cocktail of rising occupancy costs due to inflation-fuelled service charges as well as governmental action pushing up taxation costs in some markets," Mr David said.