World's most expensive office locations

Hong Kong storms into the world's top three most expensive locations
Published date: 5 January 2006

Hong Kong has soared up the global office occupancy costs league table and entered the top three most expensive office locations in the world, reveals global property adviser DTZ.



DTZÂ's ninth annual Global Office Occupancy Costs survey, published today, is a guide to accommodation costs in major prime office locations covering 117 business districts in 46 countries worldwide. Ranking for the 2006 survey is focused on a per workstation basis to better reflect the costs of accommodation. For comparative purposes all total office occupancy costs are displayed in US dollars.



London (West End) maintained its pole position in the global ranking for the sixth consecutive year with occupancy costs of US$18,740 per workstation pa. Actual office occupancy costs have risen by 5.6% however, due to exchange rate differences between the US dollar and pounds sterling, this report shows a slight drop of 3% year on year 2005/06.



Washington DC climbed two spaces to become the second most expensive location with occupancy costs of US$15,370.



The most notable finding was the emergence of Hong Kong, which posted its largest increase over the past decade, 61% to US$15,000 per workstation pa and climbed an impressive 13 places to become the worldÂ's third most expensive location. This increase has been driven by the positive take-up and business sentiment, especially by investment banks, with a greater willingness to pay for better quality offices. However, the fundamental reason for Hong Kong's surge up the table is due to the lack of available new Grade A office buildings coming onto the market.



Top ten most expensive office locations by occupancy costs in the 2006 survey:



1. London (West End)
2. Washington DC
3. Hong Kong
4. Paris
5. London (City)
6. Frankfurt
7. New York (Midtown)
8. Dublin
9. Tokyo (Central)
10. Luxembourg



India has one of the fastest growing economies in the world and a rapidly expanding real estate market, which is fuelling a surge in office occupancy costs across the country. The continued demand for space from the IT/IT-enabled services and business process outsourcing sectors is the main driver behind the growth in costs. The main beneficiary is Bangalore, which is fast becoming an established destination with large occupiers seeking consolidation and large built-to-suit facilities. However the largest increases in the 2006 survey have been recorded at Mumbai and New Delhi, which saw year on year growth of 27% and 29% respectively and now rank 20th and 43rd in the global league table.



Dubai also saw the second biggest increase in occupancy costs – up 50% to US$7,180 triggering a rise of 38 places to claim the 37th position and surpassing Riyadh to claim the third most expensive region in the Middle East, behind Doha and Kuwait City (included for the first time this year). This is a trend that DTZ Research anticipates to continue throughout 2006 due to undersupply despite the brisk development underway.



In Western Europe, London (West End), Paris and London (City) remained the top three expensive locations in Europe for the second year running, however all three locations experienced a decline in costs. This is a trend mirrored across the most of Western Europe primarily due to the depreciation of the Euro in comparison to the US dollar.



A similar picture can be seen across Central & Eastern Europe, which remained relatively flat in comparison to the findings from the 2005 survey. Marginal increases were only posted in Budapest and Kiev (13% and 15% respectively) as a result of steadily increasing demand combined with the continued deficit of high quality space in each market.



Joe Valente, Head of DTZ Research, comments: "One of the most notable themes arising from this year's survey is the growing evidence of a recovery of the major leasing markets throughout the world. The outlook for global office leasing markets is positive with the recovery gaining momentum in part because of the rise in demand from key sectors as well as the lack of supply of good quality stock. However, it is likely that the current rental cycle will peak in 2008/2009."



source: DTZ Holdings plc

http://www.dtz.com/portal/site/Globa...000e01a8c0RCRD>