The report, which reflects the cost of renting office space in tower buildings across key global cities, explains that London’s growth is partly due to a buoyant occupier market, which has seen vacancy rates reach the lowest level since 2001. Closely following London’s growth is San Francisco, which witnessed an increase of over 8 per cent considerably more than any other US city, as the city continues to benefit from its ever-expanding tech sector.
Hong Kong still tops the ranking with a prime rent of US$255.50 per sq. ft., over US$100 more expensive than New York which sits in 2nd place with a rent of US$153 per sq. ft.
Hong Kong’s large lead in the index can be attributed to a variety of factors, such as the restricted geographic area of the city which results in developers having to convert air into ‘land’ and build upwards.
William Beardmore-Gray, global head of office agency commented: “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.
“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.”
James Roberts, head of commercial research at Knight Frank, commented: “When construction started on the latest wave of London towers a few years ago, it was to the backdrop of the Euro Crisis, and some commentators said the developers had got their timing wrong. However, the doubters have been proved wrong, with skyscraper rents in London at a record high. In part, this reflects increasing appetite for exclusive space, now the austere business environment of the Global Financial Crisis is becoming a distant memory.
“San Francisco is benefiting from on-going expansion in the technology sector, and a growing preference for locating in the city over Silicon Valley. Hong Kong retains the title of ‘the world’s most expensive place to rent an office in a tower’ due to its enormous lead, but growth was slow, as a result of economic headwinds from the China slowdown. This will probably be the case in the rest of this year.”
Global Cities: The 2016 Report sets the context for investors by saying that five new cities, each the size of Los Angeles, will need to be built every year for the next five years to accommodate the expected 380 million new city dwellers. The report predicts that the number of people moving to cities over the next five years will be more than three times the current population of Japan, as they try to make the most of the economic advantages cities increasingly deliver.
Global Cities : The 2016 Report is available – please CLICK HERE
