Bangkok became the cheapest office location in Asia Pacific despite the increase in average rents by 5.3 per cent year-on-year for prime grade A CBD office buildings, according to CBRE Global Research and Consulting’s semi-annual Prime Office Occupancy Costs survey.
In contrast, Hong Kong remained the highest priced market in the world for the third consecutive year, with three other Asian markets including Hong Kong-West Kowloon and Tokyo in the top five most expensive office locations – reflecting the growing dominance of the region in the global economic scene.
Out of the 127 cities surveyed, Bangkok was ranked at 115th, with the rent of Bt842 per square metre per month. It is 12 positions below Manila and 69 positions below Jakarta, becoming the cheapest in Asia Pacific.
“Bangkok office rents increased for both grade A and grade B offices in CBD and non-CBD areas. The total amount of completed office space is 8.1million square metres and the total take up in Q1 2013 was 35,000 square metres. Around 500,000 square metres of space is expected to be completed in all areas over the next three years. Almost half of this space will be owner occupied and there will be only two new CBD grade A buildings. Rents for prime buildings in Bangkok are going to continue to rise,” said Nithipat Tongpun, Executive Director – Head of Office Services at CBRE Thailand.
In contrast, Hong Kong-Central’s overall occupancy costs Bt6,539 per square metre per month. Beijing’s Finance Street (Bt5,422), Beijing’s Jianguomen CBD (Bt5, 200) and New Delhi’s Connaught Place CBD (Bt4,974) rounded out the top five. New York’s Midtown Manhattan (10th) returned to the top ten markets for the first time since early 2012, joined by Moscow (7th) and London’s City (9th).
Globally, occupancy costs rose by a scant 1.4 per cent on a year-over-year basis as modest growth in the Americas and Asia Pacific was partly offset by a slight decrease in recessionary Europe. However, the modest global average uptick masked significant increases in markets like Jakarta, Indonesia and suburban Houston, Texas, which posted increases of 38.9 per cent and 21.2 per cent, respectively.
“While the pace of occupancy cost growth globally has slowed, limited supply of prime space in key core business centres has fuelled continuous upward movement of occupancy costs,” said Dr. Raymond Torto, CBRE’s Global Chief Economist. “The most expensive office markets often attract the regional headquarters of large multinational firms that require a prime location in a prestigious building with access to major global and regional transit routes.”
CBRE tracks occupancy costs for prime office space in 127 markets around the globe. Of the top 50 “most expensive” markets, 21 are in Asia-Pacific, 18 are in EMEA and 11 in the Americas.
In Asia Pacific, Hong Kong Central’s position as the most expensive office market continues to be bolstered by its status as a leading global financial centre. Although financial institutions have become more cost sensitive, with some considering relocating to less expensive space outside the CBD, high-quality and premium space is still sought after, especially by mainland Chinese firms which are increasingly setting up their offices in Hong Kong (Central) in prestigious buildings.
Asia also had the markets with both the sharpest annual increase and decrease among the markets tracked. Jakarta’s 38.9 per cent increase (to Bt1,737 per square metre) was driven by a substantial recovery in domestic demand in the wake of Indonesian sovereign debt’s return to investment-grade status, which energised leveraged investment initiatives and drove up demand for prime office space across the capital. Singapore experienced the largest annual decrease worldwide (-16.3 per cent) due, in part, to increases in both new supply and the availability of lower-priced secondary space. The bulk of the rental decline occurred in early 2012, with only minimal rental corrections in the second half of 2012 and in the first quarter of 2013.
Top Ten Most Expensive Markets
Rank /Market/Occupancy cost (in baht per square metre per month)
1 Hong Kong (Central), Hong Kong /6,539
2 London – Central (West End), United Kingdom/6,187
3 Beijing (Finance Street), China/ 5,422
4 Beijing (CBD), China/5,200
5 New Delhi (Connaught Place – CBD), India/ 4,974
6 Hong Kong (West Kowloon), Hong Kong /4,834
7 Moscow, Russian Federation /4,588
8 Tokyo (Marunouchi/Otemachi), Japan/ 4,480
9 London – Central (City), United Kingdom/ 3,695
10 New York (Midtown Manhattan),US/3,354
Source: CBRE Global Research and Consulting, Q1 2013
Source: The Nation