Location-Location-Location is the phrase when it comes to real estate. In a global market, being in the proper location can be a make-or-break proposition. Where a firm offices is akin to a hallmark to customers. Location in an office market is a statement of who their customers are (or customers they want), the type of employees they wish to recruit and retain, and where their expectations are for future growth. Office location telegraphs a plethora of information.
Prime office location costs – the best of the best — rose 3.6 percent on average globally in Q1 2019 compared to a year ago – fully 50 percent greater than the 2.4 percent increase seen in Q1 2018 according to CBRE as reported by the National Real Estate Investor (NREI).
CBRE posts a quarterly report on prime office occupancy costs, with the top-20 ranked markets as followed by CBRE. Other data provided by research staff at NREI are included in the following table. Office occupancy costs include rent, local taxes, and services charges required to occupy the highest-quality office space in the premium location of the city. Central Hong Kong has the greatest annual occupancy cost globally at $322 per square foot. That annual occupancy cost alone exceeds the market value per square foot of the majority of office space globally. Annual occupancy costs and year-over-year changes are all expressed in U.S. Dollars.
The next table shows the greatest percentage increase in prime office occupancy costs when expressed in local currencies – also taken from the CBRE report.
Not all markets increased in cost when stated in local currency, with 15 of the 122 markets tracked by CBRE posting a year-over-year decline in Q1 2019. All 15 are listed in the following table. Some of the declines were a direct result of new supply of office space delivered to the market. The interaction of supply and demand remain the key determinants of occupancy costs.
To login and read CBRE’s global price office occupancy cost report click https://www.cbre.com/research-and-reports/Global-Prime-Office-Occupancy-Costs-2019
To read the NREI article on the 25 most expensive markets click https://www.nreionline.com/office/25-most-expensive-office-markets
Despite the growing digital world, the need for bricks-and-sticks office space remains – in the proper location.