BEIJING-The local office market saw office rents rise astronomically to $130 per square foot in 2011, an increase of 75% from a year prior, according to a recent report from Cushman & Wakefield. However, it’s believed the city, and the rest of the global office market, will see a slow-down of activity in 2012 as owners and tenants pause to feel out fundamentals such as the European debt market and troubles in the Middle East.
Hong Kong remains the costliest place to lease office space, at about $244 per square foot, with London still holding the number two spot at $239 per square foot. Tokyo and Moscow round out the top five at $197 per square foot and $148 per square foot, respectively, according to the report.
The Asian markets had the most increases in office rents, with Shanghai going up by 27% and Singapore increasing by 24%. In China, office building rents will continue to trend upward, said managing director Andy Zhang. “With a single-digit record vacancy rate and not much quality supply foreseeable in the coming years, we expect Beijing and Shanghai to maintain the landlords’ market position in 2012, but the rental growth will slow down.”
Leader Hong Kong, however, isn’t following the Asian trend. John Siu, executive director for Cushman in Hong Kong, said in a statement that the city saw prime tenants such as banks become more cautious about expansion plans. The city only had 1% growth since year-end 2010. “Rents in the (CBD) are expected to adjust downward by 10% to 15% over the next 12 months,” he said.
New York City dropped from fifth to the sixth most expensive office market, at $120 per square foot, with only 4% growth since late 2010. Any growth is welcome, however, and the city bumped Rio de Janeiro from the spot of the top office rent in the Americas.
Globally, office rents grew by 3% in 2011, which was the second consecutive year of positive rental growth following a year of declining rents in all regions in 2009. These increases, however, are mostly counted in the core markets, and even these gateway cities will continue the slower pace of recovery that started in the fourth quarter, said Barrie David with Cushman’s Global Research Group. “Given the increased caution and uncertainty as 2011 progressed, the outlook for this year is more muted growth and occupiers to remain in the driving seat,” he said.
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