Fairfield County, CT, San Francisco and New York Follow Tokyo, London and Hong Kong as World’s Most Expensive Office Locations
Hong Kong has replaced London’s West End as the most expensive office market in which to accommodate staff, according to new research from Cushman & Wakefield.
The annual Office Space Across The World report surveys occupancy costs across 215 office markets in 58 countries worldwide. Using proprietary data, it ranks occupancy costs per workstation and workplace densities for newly developed or refurbished office space globally. Fairfield County, CT, San Francisco, New York and Silicon Valley placed fourth through seventh in the Top 10 of worlds’ most expensive office locations.
At a global level, the average annual cost per workstation rose by 1.5% over the last 12 months. This was driven by the Americas, where costs increased by 4.2% and Asia Pacific, where they rose by 3.4%. EMEA posted a fall of 1.3%. Currency fluctuations have produced some of the biggest changes in the report’s rankings. For companies looking at their local costs, this factor will influence them more than property markets over the next year.
Limited availability and strong demand from mainland Chinese corporations have pushed Hong Kong costs up 5.5% to $27,431. Escalating rents are driving a growing number of multinational corporations to decentralize to lower-cost areas. As a comparison, for the same cost of accommodating 100 staff in a Hong Kong office, 300 can be accommodated in Toronto, 500 in Madrid and 900 in Mumbai.
In contrast, costs in London have fallen 19% since 2016 – largely as a result of currency depreciation – to an average of $22,665 per workstation per annum. Paris, also in the top 10 albeit nearly half the cost of London, saw costs fall too.
Along with rising occupancy costs, workplace density – the number of workers within a given space – has also increased at a global level in 2017. Employers, especially in traditional ‘power cities’ like New York, London, Tokyo and Hong Kong, want to be as efficient as possible in order to accommodate rising workplace populations and get the best value from increased occupancy costs.
The report notes discernible trends already affecting the ranking of office markets. The phenomenal growth of the tech sector has spawned a new generation of firms less wedded to traditional global power cities than banks and financial institutions. Technology also enables employees with a laptop and internet connection to work anywhere, changing the corporate landscape as central office buildings increasingly assume a different role in fostering collaboration.
Report author Sophy Moffat, Research & Insight EMEA, Cushman & Wakefield, said, “Hong Kong and London are by far the most expensive office markets in which to accommodate staff, but secondary cities are beginning to compete in the digital age in ways not possible during the industrial age. Beneath the established global contenders, the likes of Stockholm, Austin and Seoul are moving up our cost rankings. Austin, which has risen to 21 on our list, is still 40% cheaper than Silicon Valley and has become a tech hub in its own right.
“As workstation costs rise, it’s crucial that employers get the most out of their workforce by providing work environments to help attract and retain the best talent in a globally competitive marketplace. There’s a tipping point when density is too high or the amount of collaborative space is too low. Both can be a hindrance to people getting their work done. As competition heightens between spaces and cities, consideration of user experience and employee wellbeing is imperative.”
In the longer term, the report states, there will also be some rebalancing of occupancy costs across the world as talent and business orientates towards emerging economies. By 2025, more than 45% of Fortune Global 500 companies are expected to come from the emerging markets compared to just 5% in 1990.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.