Hong Kong is the most expensive city for renting an office space in a skyscraper, research by consultancy Knight Frank shows. New York is found on second place and Tokyo secures the third spot. London, which is currently found on fourth place, is closing in on the top 3 with the highest level of rental price growth recorded at almost 11%.
In its recently released ‘Global Cities: The 2016 Report’, global real estate consulting firm Knight Frank researches, among others, the cost of renting office space in tower buildings across key global cities to provide investors with a context for their investments.
Hong Kong is the world’s most expensive city when it comes to renting office space in a skyscraper, at $255.50 per sq. ft. New York is the second most expensive at $153.00, which is more than $100 cheaper than Hong Kong. According to the researchers, Hong Kong’s large lead can be attributed to a variety of factors, including the restricted geographic area of the city which forces developers to convert air into ‘land’ and build upwards. Tokyo completes the top three with prices of around $125.00 per sq. ft.
London, which is found on fourth place with prices of $122.00 per sq. ft., has experienced the highest level of rental price growth. Compared to six months ago, the price of office space in a tower building in UK’s capital increased by 10.7% to $122.00. This large increase is partly a result of a buoyant occupier market, which saw vacancy rates reach the lowest level since 2001. Skyscrapers in San Francisco saw the second largest increase in the rental prices of office space, at 8.2%, followed by Shanghai, at 5.3%. Two cities saw their rent costs drop; skyscraper rental prices dropped by 12% in Moscow to $79.00 and by 1% in Beijing to $67.00.
“Occupier confidence has obviously played a major part in the increase in tower rents achieved across most of the major global cities. However, the main point of interest is that this confidence has coincided with occupiers being more prepared to compete for space that was traditionally outside their preferred locations,” comments William Beardmore-Gray, Global Head of Office Agency at Knight Frank, on the increases in rental prices. “London is a good example where these locational barriers are being broken down with oil, tech and private equity companies relocating across London from their more traditional West End locations.”
Last year, consultancy CBRE conducted a similar research into the most expensive office markets of the globe. Their ranking, which was not exclusively skyscrapers, ranked London the world’s most expensive city, while Hong Kong was found on second place.