The semi-annual survey of occupancy costs for class A office space covers 155 metro areas around the globe. It shows that the total occupancy costs in US dollar terms have declined in 81 of these areas.
Silicon Valley was no exception. In January of this year, it was listed as the sixth most expensive market with a total average occupancy cost of almost $90 per sf. In the last sixth months, it proved to be the hardest hit market in North America with total occupancy costs dropping to $68.90 per sf per annum. CB Richard Ellis experts expect rents in this market to continue spiraling downward through the end of the year.
Of the top 10 markets listed, only three showed increases in occupancy rates. London's West End, which soared to the top of list as the most expensive office location, edged up less than a dollar to $157.63 per sf from the $156.89 per sf reported six months ago. Munbai's average occupancy rate, which came in at No. 7, climbed from $80.16 per sf to $89.38 per sf. And Manhattan, the tenth most expensive city, showed rates that rose from $64.63 per sf to $64.92 per sf.
The depth of the economic slowdown in the US and the speed with which the global technology sector came to a halt has put the brakes on rental growth almost universally," says Bill Rothe of CB Richard Ellis. "While this is bad news for some real estate investors, it is great news for corporate tenants and their cost projections for real estate."
Rothe is quick to point out that the pace of rental growth last year in many of the top markets globally was clearly unsustainable and if such rental growth had continued without being checked throughout this year, many markets were likely to witness a far more catastrophic correction.
As a whole, the real estate market shows overall growth over the 12-month period from July 2000 to July 2001, even with the drops over the last six months. With overall occupancy rates rising 33.2% per sf to $36.16 per sf per year, the Oakland/East Bay market posted the largest percentage increase in occupancy rates in this timeframe.
Even Silicon Valley's yearly figures show an approximate 20% increase.
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