New York is a bargain for office space when compared to its international competitors, according to the latest survey of occupancy costs (rents, taxes, and utility costs) around the globe from Cushman & Wakefield, one of the largest privately held commercial real estate firm in the world.
New York ranked fourth on the list in “Business Space Across The World,” which is published by Cushman & Wakefield. London ($164.70 per square foot), Paris ($105.78) and Tokyo ($91.33) were the three most expensive.
“New York is highly competitive on the global stage, which makes it a great place to do business for international companies,” said Bruce Mosler, president, U.S. Operations, C&W.
London has retained its position as the world’s most expensive city for office space in this year’s survey.
The total cost of occupying one square foot of prime office space in London’s Mayfair district is 55 percent more than in Paris, which overtakes Tokyo this year to finish in second place, primarily as a result of the strength of the euro. Dublin joins the top 10 for the first time, replacing Frankfurt.
Of the world’s 202 top office locations monitored in 45 countries in the year ending Dec. 31, 2003, rents (which form the largest proportion of total occupancy costs) decreased in local currency terms by an average three percent–significantly less than the 7 percent decrease recorded the year before. Around 40 percent of locations saw rents either increase or remain stable, with decreases recorded in the remainder.
“The worst is behind us as the early signs of economic recovery and more upbeat business sentiment filter through to the world’s key office markets,” said David Hutchings, head of research, Cushman & Wakefield European Operations.
However, he cautions: “As the business environment continues to improve, it will take time for rents to increase. The decision to expand office space in times such as these is one of the last steps to be taken by companies, after they have decided how they will grow, in which markets, and how many new people they will take on.”
Central/Eastern Europe is the best regional performer, with rents falling by only 1.2 percent last year. “Sentiment in Central and Eastern Europe has been increasingly positive as the region experiences a general opening in the run-up to a number of countries joining the European Union in May,” said Hutchings. “The region has also been favored as a location for back-office functions, with corporations attracted by the relatively low cost of office space, and a highly skilled and multilingual workforce.”
Looking at the ranking of the most expensive location for total office occupancy costs in each of the 45 countries monitored, the Hungarian capital Budapest made one of the biggest jumps, moving up 10 places to 27th position. Hutchings explains: “Budapest has performed well, but this is partly due to a few landmark deals, which have meant that top rents in non-central locations went up by 8 percent. Average rents have remained stable and still highly competitive on a global basis.”
European locations account for around half of the top risers in office rents when valued in local currency terms. The increase in costs in certain European locations for US tenants has been more marked, with the Euro rising last year by 20 percent against the US dollar.
Looking ahead, “Business Space Across the World” predicts a more optimistic year for 2004 as the effects of economic recovery become apparent, with possible office rent increases in top locations in the following countries, mainly due to stronger demand: Argentina (dependent on a recovery of the services sector, in particular banking and financial companies); Australia (focused on Sydney); Austria (occupiers trade up existing space for modern units); China – Shanghai, Beijing and Hong Kong; Hungary (where vacancy rates are expected to fall as development activity slows); Malaysia; Portugal; South Korea; Thailand; and the United States.
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