Where in the World are The Most Expensive Office Areas? Jones Lang LaSalle research reveals the world’s most expensive markets for office space, what industries dominate them and where the future lies.
Strong demand from niche financial and technology sectors is driving up the cost of office space in many cities around the globe, but a new analysis by Jones Lang LaSalle (NYSE: JLL) reveals the 12 premier office districts have been the biggest beneficiaries of the trend, witnessing higher competition by companies for space and driving rent prices to new highs.
JLL’s new list of the “World’s Most Expensive Office Areas” reflects a variety of global and regional economic trends and highlights the key factors companies consider when seeking premier office space. All 12 of the office districts are within the world’s most internationally connected and easily accessible cities, which are home to the greatest number of top global corporate headquarters, the world’s top talent and the highest net worth individuals.
Despite the upheavals in financial markets in recent years, the research points to the financial sector as the primary demand-driver in these top locations. A general lack of available space adds an aura of exclusivity in these supply-constrained areas, luring emerging companies in other sectors, as well retail, hospitality and tourism attractions.
JLL Director of Research Jeremy Kelly says the same set of Global Cities will continue to dominate the list in the years to come, although the order will change with sector-driver market conditions and the continued rise of the technology and mobile sectors. For example, Silicon Valley will continue to climb the list as tech-driven demand continues to push up rental rates.
“With premium rents in the CBDs of a number of U.S. cities now increasing, we can expect to see additional U.S. markets ranking among the Most Expensive over the next 24 months,” he said.
Market dynamics can also have the converse effect, however. “Tokyo was the most expensive market for office space in the world for many years,” Kelly said, “but it was hit hard by the global financial crisis and has been surpassed by other Asian power cities.”
The Most Expensive Office Areas for 2013 are:
1. St James’s, LONDON: GBP 125 per sq. ft. per year (USD 194 per sq. ft. per year)
Home to world-leading hedge and sovereign wealth funds, and niche wealth and investment managers, St James’s personifies the West End’s unparalleled accessibility, luxury amenities and proximity to clients.
2. Central, HONG KONG: HKD 105 per sq. ft. per month (USD 162 per sq. ft. per year)
Complemented by first class hotels, luxury retail, excellent transport links and interconnecting walkways, Central is the location of choice for the city’s banking and finance community.
3. Finance Street, BEIJING: RMB 750 per square meter per month (USD 137 per sq. ft. per year)
A Beijing submarket planned specifically for highest-tier financial institutions and major state-owned enterprises, Finance Street also attracts global investment banks and insurance companies.
4. Rue du Rhône, GENEVA: CHF 1,150 per square meter per year (USD 116 per sq. ft. per year)
Rue du Rhône is Geneva’s prime location for private wealth management, banking and luxury retail brands.
5. Menlo Park, SILICON VALLEY, CALIFORNIA (USD 111 per sq. ft. per year)
The epicenter of the technology universe, Sand Hill Road in Menlo Park is home to many venture capitalists.
6. Kremlin Area, MOSCOW: USD 1,150 per square meter per year (USD 107 per sq. ft. per year)
Office space in Moscow’s Kremlin area is popular with Russian and international finance and legal tenants. New construction is tightly restricted, and that has helped further boost the value of office space in the area.
7. Fifth Avenue, MIDTOWN MANHATTAN, NEW YORK: USD 104 per sq. ft. per year
Consistently ranked among the most expensive shopping streets in the world, Fifth Avenue is also home to numerous hedge funds looking for top-quality space in Midtown.
8. Raffles Place/Marina Bay, SINGAPORE: SGD 11 per sq. ft. per month (USD 103 per sq. ft. per year)
The heart of Singapore’s financial district is served by a world-class subway system and is a vibrant environment for work, living and play.
9. Golden Triangle, Champs Elysées area, PARIS: EUR 800 per square meter per year (USD 99 per sq. ft. per year)
The center of Paris’s tourism and retailing is also an office hub for high-value-add businesses including international law firms and banks, and corporate tenants seeking accessible, high-quality buildings in close proximity to clients.
10. Marunouchi, TOKYO: JPY 28,600 per tsubo per month (USD 98 per sq. ft. per year)
Marunouchi, located on the west side of Tokyo Station, is a long-established office precinct where the lower floors of buildings typically house luxury retail, and higher floors are office space.
11. Uraniastrasse and Paradeplatz area, ZURICH: CHF 900 / per square meter per year (USD 91 per sq. ft. per year)
Uraniastrasse and the area round the Paradeplatz in the core CBD of Zurich feature excellent accessibility and amenities, with office space heavily dominated by the banking sector and private wealth management.
12. Lujiazui, SHANGHAI: RMB16 per square meter per day (USD 87 per sq. ft. per year)
Lujiazui was transformed from empty grassland to a bustling financial district in just 20 years and is now Shanghai’s largest CBD, home to 650 Chinese and international financial institutions.
- The “12 Most Expensive” ranking features quoted rents for the most rarefied part of each of these cities: premium office space in top sub-markets. Rents will be quite different from the market as a whole.
- Only one office location has been included per city.
- The costs PSF are asking rent in local floorspace measurement conventions.
- The list does not include several “emerging” and “frontier” cities, where severe supply issues create exceptionally high rents, such as Rio de Janeiro and Lagos.
- The extreme example is Luanda, Angola, where asking rents are as high as $200 per square foot.
- Many of these ‘thin’ markets are not directly comparable to the more mature markets featured on the list.
- Headline asking rents in Sydney would put this city in the Top 12. But taking exceptionally high incentive levels into account — typically over 30% of gross rent – Sydney lands just outside the Top 12.