Those prestigious CBD addresses don't come cheap in the US' Big Three, which are the most expensive in the nation and sixth, seventh and ninth in the world. With costs up 30% to 49% in these markets, New York City's Midtown occupancy costs run $80 per sf, with Boston trailing by a mere dollar. San Francisco has come in at $72 per sf, according to a collaborative 72-city study of 76 markets by DTZ Debenham Tie Leung, The Staubach Co. and Boston-based AEW Capital Management LP.
Internationally, the Big Three are London's West End, Tokyo's Central Five Wards and London's City submarkets, respectively. Class A office space tallies $158.21 per sf in the West End, with Tokyo's CBD ringing up $112.76 per sf and London City, $126.11 per sf.
It's the percentage increase to rent in the neon-and-glass CBDs that is particularly telling about how deep pockets must be to finance the space. Boston's suit-and-tie crowd is shelling out 49.08% more in occupancy costs than it did in 1999. Hong Kong's total, ranked fifth in the world with per sf rates of $105.83, has spiked 47.91% and San Francisco's up 46.94%. NYC's Midtown may be the nation's most expensive place to do business, but its just 33.33% more expensive than the previous year. The world's most expensive city for officing, London's West End, is up 33.21%. The study calculates the full-service cost in US dollars for renting about 10,000 sf of class A CBD space, including property tax, maintenance and tenant improvements if the tenant is paying the tab.
In a prepared statement, Doug Poutasse, AEW's chief investment strategist, says, "The general strength of the US economy in 2000 and extraordinarily tight office market conditions drove this rise in office occupancy costs, particularly in technology-heavy cities such as San Francisco and Boston."
Third-ranked San Francisco is $19 higher than fourth-place New York City's Downtown, which comes in at $53 per sf. The remaining Top 10 US cities, in order and occupancy costs, are Washington, DC, $50; Chicago, $49; Seattle, $41; Toronto, $40; Atlanta, $29; and Dallas, $28. Houston's $26 per sf puts it one step above dead last-ranked Detroit's $23 per sf.
"The expected slowing--but positive--economic growth in 2001 may be healthy for a variety of sectors in their competition for office space," Jim Leslie, Dallas-based Staubach's president and COO, says in a prepared statement about the US markets.In the remaining Top 10 internationally, Tokyo's Outer Wards has copped fourth place at $112.76 per sf; Paris, eighth, $75.03; and Edinburgh, Scotland, 10th, $53.37.
The analysis concludes Western Europe is by far the costliest region to set up a CBD shop, with the average per sf rate riding at $49.93. North America ranks second overall at $43.78 per sf; Eastern and Central Europe, $33.13; and Asia-Pacific, $31.96 although it has three cities falling in the Top 10. Overall, the law of supply and demand is at play, keeping rents softer in Central and Eastern Europe and higher in Western Europe and North America.
It appears all eyes are watching the World Trade Organization's embrace of China, where foreign and domestic businesses are scrambling to acquire high-quality office space in the leading cities of Shanghai and Beijing, both low performers in years prior. The going average rate is $27.49 per sf in two Shanghai markets and $43.59 in Beijing. Singapore, shaken by its shrinking currency on the world market, has had its occupancy costs jump 23%--$53.76 per sf--based on a US dollar calculation.
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