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Singapore

Which Asian city has the world’s priciest office space?


​​​SINGAPORE, 1 December 2016 – Hong Kong is the city with the world's highest rent for a premium office, with London and New York in second and third place respectively, according to JLL's latest Global Premium Office Rent Tracker.

Hong Kong takes a significant lead in terms of occupancy costs compared to the two other global cities. The price of premium office space — defined as those in Class A buildings with excellent facilities — in Hong Kong's Central district is more than 50 percent higher than rates in London and New York. It costs US$302 per square foot per year to rent space in a top–notch building in Hong Kong alongside US$197 per square foot in London's West End and US$194 per square foot in Midtown New York.

This is also a new high for Hong Kong compared to US$262 a year ago. Prices were pushed up due to strong demand and shortage of stock as companies from Mainland China look to have a base in Hong Kong.

"Hong Kong's Central district is being reshaped as western banks and financial institutions downsize or move out due to global challenges such as slower economic growth and increased compliance and regulations," says Megan Walters, Head of Research, Asia Pacific, JLL. "Mainland Chinese wealth and asset companies are moving in as they seek to boost their presence in Hong Kong. This demand is expected to continue with the launch of the Shenzhen-Hong Kong Stock Connect program in December. The market is also set to get more fragmented since the initial requirement from these companies is usually less than 5,000 square feet. This could prove challenging for both tenants and landlords for the long term."

Both Beijing and Shanghai fell a place to fourth and sixth position respectively. Tokyo leapfrogged past Shanghai to take fifth spot, propelled by high leasing activity and big-ticket pre-commitments, while New York has seen premium rents increase by more than 10 percent in 2016. Singapore takes 18th spot in the rankings after a rental correction with more office space supply in the city-state.

"The world's most important and interconnected cities dominate the top spots in the rankings," says Walters. "There is a clear demand for them as seen in how vacancy rates are less than 2 percent in three out of these six gateway cities, specifically Hong Kong, Beijing and Tokyo. And Singapore's relatively lower rent gives it a competitive advantage over these costlier Asian gateway cities."

Singapore offers Cost Advantage

Notably absent from the top 10 is Singapore, which is ranked 18th, easing from last year's 11th position.

Dr Chua Yang Liang, Head of Research for Southeast Asia, explained: "Office rents in Singapore continued to ease in 2016 amid the downbeat economy and substantial completion.  On the other hand, rents in other key financial hubs in Asia rose during the same time period.  This has raised Singapore's office occupancy cost competitiveness. For example, while Hong Kong's office occupancy cost in US dollars was 181 per cent higher than Singapore a year ago, the gap has widened to 261 per cent by September 2016.  Similarly, the rental gap between Beijing and Singapore has widened from 104 per cent to 114 per cent during the same time period."

Chris Archibold, Head of Office Leasing for JLL in Singapore (and the Chair of the Global Office Leasing Group who put together the Premium Office Rent Tracker), added: "In the Singapore context, despite the uncertain economic conditions, the availability of  new supply has seen a number of corporations taking advantage of the competitive leasing environment by committing to the new wave of supply. The demand is predominantly driven by the efficiencies (space need reduction) that can be achieved by  relocating from buildings with small floor plates to buildings with large regular shaped floor plates coupled with changes to more efficient work place strategies.  Many of these occupiers are seeing efficiency gains of between 8 to 12 per cent.  It is no longer a flight to quality but more of a flight to efficiency.  Given this trend, leasing activity levels have been strong but overall net take up remains weak.  The gap between prime building rents and those on secondary buildings has narrowed over the last  18 months as landlords have sought to attract occupiers.  This gap is likely to rebalance somewhat in the coming 12 months as rental pressure is set to hit the older buildings when occupiers who have committed to space in the new projects vacate their existing premises".

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About the JLL Global Premium Office Rent Tracker

In this second edition, the report compares like-for-like occupation costs across 35 major markets in 31 cities of differing function and evolution, ranging from Established World Cities (such as New York, London and Tokyo) through to Emerging World Cities (like Mexico City Moscow and Mumbai) and New World Cities (as typified by San Francisco, Sydney and Toronto). The Tracker includes the key elements of occupancy costs – net effective rent, service charges and property tax – all standardised to enable international comparisons.

 The Top 10 Most Expensive City Districts For Renting Office Space

 

1.      Hong Kong, Central

2.      London, West End

3.      New York, Midtown

4.      Beijing

5.      Tokyo

6.      Shanghai

7.      Delhi

8.      San Francisco 

9.      London, City

10.  Hong Kong, Island East 

Click here to download the report.