Hong Kong Office Market Most Expensive in the World, Again
According to JLL, for the second consecutive year, Hong Kong's Central commands the world's most expensive premium office rent, at an average of $323 per sq. ft per annum (about HKD210 per sq. ft per month). On the other hand, the city offers the world's steepest rental discounts in non-core business districts, thus providing office space at lower rental levels, which helps to maintain its competitiveness.
JLL's latest Premium Office Rent Tracker (PORT) reveals that the market with the most expensive premium office rent in the world is Central in Hong Kong, followed by New York's Midtown, London's West End, Beijing's Finance Street and Silicon Valley in California. Seven out of the ten most expensive office space cities in world are in Asia Pacific. Chinese cities now account for half of top 10 premium office locations.
Premium office rents refer to the 'top achievable' in units over 10,000 square feet in the highest quality building in the premier office district of each city.
"China's strong market fundamentals have led to Hong Kong's Central, Beijing's Finance Street, Beijing's CBD, Shenzhen's Futian and Shanghai's Pudong making the list," says Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services, JLL Asia Pacific. Together with Delhi and Tokyo-Marunouchi, Asia Pacific markets make up seven of the world's 10 most expensive premium office rental locations.
"Hong Kong's high premium office rents are driven by ongoing supply shortages and high demand from firms from mainland China. This tight vacancy has boosted rents in Hong Kong's office market by 0.8 per cent quarter-on-quarter in Q3 2017," says Denis Ma, Head of Research, JLL Hong Kong.
"Decentralization is likely to become a trend as companies seek more affordable locations, with a 64 per cent difference between Hong Kong Central and alternative business districts such as Hong Kong East."
"PRC companies are expected to remain active in Central's office leasing market next year. We expect Central's Grade A office rents to grow up to 5% in 2018. While Central's office rents rank as the highest in the world, there is no shortage of cost saving measures and quality office space in this city. This factor helps Hong Kong maintain its competitiveness," says Alex Barnes, Head of HK Markets at JLL Hong Kong.
Tech companies are more willing to splurge on premium office space
Looking beyond Asia, technology-rich cities feature strongly among the most expensive office markets globally, including the U.S. tech hubs of New York Midtown, Silicon Valley, San Francisco and Boston, as well as London and Stockholm in Europe.
In Asia Pacific, cities with a strong tech presence such as Beijing (ranked 4th), Shenzhen (ranked 8th), and Tokyo (ranked 9th) have some of the highest premium office rents. Shenzhen - a Tier 1 Chinese city - was included in the report for the first time, with the Futian district commanding the highest office rents.
"We continue to see a greater number of companies from the technology sector targeting premium buildings to attract top talent and to enhance their brand image," says Mr. Sheldon."We've observed a significant number of tech occupiers upgrading their premises from serviced to proper offices, and from Grade B to Grade A space in Asia Pacific."
While cost is a key factor, companies selecting their next office location are prioritizing access to talent, explains Mr Sheldon.
"Firms are likely to continue focusing on office layouts that have innovative space offerings to make sure they meet employee needs, while driving effectiveness and engagement levels," he says.
"This includes providing employees with more flexibility and choice over their working environment. High quality services, from food and beverage to recreation spaces, gyms and space to support well-being, are likely to become standard features in premium locations."