According to JLL, Hong Kong's Central charges the world's most expensive premium office rent for the second year in a row, at $323 per square foot per year (about HKD210 per sq. ft per month). On the other hand, in non-core business districts, the city gives the world's steepest rental reductions, allowing it to provide office space at cheaper leasing rates and maintaining its competitiveness. doha house
According to JLL's newest Premium Office Rent Tracker (PORT), Central in Hong Kong has the world's most expensive premium office rent, followed by New York's Midtown, London's West End, Beijing's Finance Street, and Silicon Valley in California. Asia Pacific is home to seven of the world's 10 most expensive office cities. Half of the top ten premium office locations are now in China.
Premium office rents refer to the 'best available' in units larger than 10,000 square feet in the best building in each city's flagship office sector.
"Hong Kong's Central, Beijing's Finance Street, Beijing's CBD, Shenzhen's Futian, and Shanghai's Pudong have all made the list due to China's strong market fundamentals," says Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services, JLL Asia Pacific. Asia Pacific markets, along with Delhi and Tokyo-Marunouchi, account for seven of the world's ten most costly premium office renting destinations.
"The high premium office rentals in Hong Kong are driven by continued supply constraints and strong demand from mainland Chinese companies. Rents in Hong Kong's office market increased by 0.8% quarter-on-quarter in Q3 2017, thanks to the tight vacancy situation "Denis Ma, Head of Research at JLL Hong Kong, agrees.
"With a 64% disparity between Hong Kong Central and alternative business districts like Hong Kong East, decentralization is likely to become a trend as corporations seek more economical locations."
"Companies from the People's Republic of China are projected to continue active in the Central office leasing market next year. Central's Grade A office rentals are expected to rise by 5% in 2018. While Central's office rentals are among the highest in the world, the city offers plenty of cost-cutting opportunities and high-quality office space. This factor contributes to Hong Kong's competitiveness "JLL Hong Kong's Head of HK Markets, Alex Barnes, agrees.
Tech firms are more prepared to invest in high-end office space.
Beyond Asia, technology-rich locations, such as New York Midtown, Silicon Valley, San Francisco, and Boston in the United States, as well as London and Stockholm in Europe, are among the most costly office markets worldwide.
Cities with a significant tech presence, such as Beijing (4th), Shenzhen (8th), and Tokyo (9th), have some of the highest premium office rentals in Asia Pacific. For the first time, Shenzhen, a Tier 1 Chinese city, was included in the report, with the Futian neighborhood fetching the highest office rentals.
Mr. Sheldon says, "We continue to see a growing number of technology companies selecting luxury buildings to recruit top personnel and boost their brand image."
"In Asia Pacific, we've seen a substantial number of IT occupiers upgrade their premises from serviced to genuine offices, as well as from Grade B to Grade A space."
While pricing is important, Mr Sheldon explains that access to talent is also important when choosing a new office location.
"Firms will likely continue to focus on office layouts with innovative space offers to ensure that they suit employee needs while driving effectiveness and engagement levels," he says.
"This involves giving employees more control over their working environment and more flexibility. Premium places are anticipated to become common features, with high-quality services ranging from food and beverage to recreation spaces, gyms, and well-being spaces."