Hong Kong, London, Tokyo Continue to be World’s Most Expensive Office Markets
New Global Office Research Report Indicates Rio, World Cup and Olympic Host City, Tops Global Vacancy Rate
CITY, June 05, 2013, According to a new Global Office report by Colliers International, global markets are reaching economic equilibrium between supply and demand after weathering challenges in Europe, China and the USA. While some markets appear to still be lagging, the majority are experiencing more stability than they have in some time. Many markets are experiencing stability for the first time in several years.
“Olympic cities past, present and future interestingly comprised the top three cities in terms of vacancy rates in 2012 - Rio De Janiero (2.2 per cent), Beijing (3.5 per cent) and London 5 per cent), said Mark Charlton, Head of Research and Forecasting at Colliers International. “Rents in Rio are three times more expensive than anywhere else in Latin America and are only set to rise with the Olympic and World Cup effects.
“The leading global markets of Hong Kong, London and Tokyo continue to be the most expensive in terms of occupancy costs, with Hong Kong demanding costs of $154.78, London $143.14 and Tokyo $99.29. Despite costs in London increasing by almost $10 and leaders Hong Kong falling by a similar figure year on year, it still remains the most expensive place to rent office space.” Charlton continues. “When it comes to prime yields Hong Kong once again tops the charts with the lowest yield globally at 2.53 per cent, followed by Vienna at 3.5 per cent and Zurich 3.8 percent. These low yields are a result of high investor demand for a limited amount of quality stock. Investors continue to favour these markets due perceived relative stability and safe haven status.”
Colliers experts point to several global key trends in 2013 that underscore this search for equilibrium:
- Europe: While the threat of a Eurozone break-up has diminished, the European office market continues to operate at a slow pace, with pockets of rental growth in parts of Northern Europe like Germany and the Nordics, and rental weakness across most of Southern Europe and some fringe Central and Eastern markets. In Germany, occupier demand began rising in the first quarter of 2013, while demand in Paris is expected to stabilize this year.
- United States and Canada: Strength in the ICEE (intellectual capital, energy and education) markets will remain the primary driver of office-using employment growth through this year, with the vacancy rate improving to nearly 14 percent in the first quarter of 2013, dropping for the fifth consecutive quarter. Meanwhile a strong rebound in the for-sale housing market is poised to benefit U.S. suburban office markets in 2013 a variety of service providers open offices and resume hiring to cater to new developments, particularly in hard-hit markets like Phoenix, Las Vegas and parts of Florida.
- Mexico City: Office development is strong, with 20 new buildings developed in 2012, 54 more under construction in the first quarter of 2013, and a 17 percent increase in absorption. In the next five years, Mexico Citythe for-sale housing maexpected to increase by about 3.2 million square feet, but with a stable vacancy rate, the market should have enough absorption to fill the new properties.
- Beijing: While demand for Class A space decreased in the second half of 2012 and absorption also decreased significantly, overall rental rates still grew by nearly 20 percent. Demand is expected to remain largely stable for the remainder of 2013.
- Sydney and Melbourne: Domestic investment has doubled since 2011, now making up 78 percent, and is expected to remain strong. The leasing market remains slow despite tightening vacancy rates, positive absorption and rental growth, with most activity focused on lease renewals and consolidations. In Melbourne, a lack of business confidence has led to a slowdown in demand and tenant commitment. However, Colliers experts expect certainty to return to the market and drive demand in 2014.
- Mumbai: Office absorption rose through 2012 despite occupier caution, with demand driven by the banking, financial services, insurance and IT industries. Colliers expects healthy demand to continue in 2013 with The Andheri, BKC, and Lower Parel submarkets the preferred destination due to availability of Class A space.