China's Hong Kong has become the world's most expensive office market due to lack of space in prime areas and stronger demand from the mainland financial firms, according to a recent report released by leading commercial property and real estate services adviser CBRE.
CBRE Research's semi-annual Global Prime Office Occupancy Costs survey released on Wednesday showed that Hong Kong Central's overall prime occupancy costs 290 U.S. dollars per sq. ft. per annum, topping the "most expensive" list and displacing London's West End (262 U.S. dollars per sq. ft.), which dropped to the second place.
Beijing's Finance Street (188 U.S. dollars per sq. ft.), Beijing's Central Business District (182 U.S. dollars per sq. ft.) and Hong Kong's West Kowloon (179 U.S. dollars per sq. ft.) rounded out the top five, according to the report.
The study also found that the Hong Kong markets had the largest and third-largest year-on-year prime occupancy cost increase among the 126 cities surveyed, with Hong Kong's West Kowloon rising 19.5 percent and Hong Kong's Central District up 14.2 percent, respectively.
"A lack of space in prime areas in Hong Kong, coupled with stronger demand, particularly from mainland financial firms, allowed landlords to push rents upward in the 12 month period through to end June," said Rhodri James, executive director of Advisory and Transactions Services Office, CBRE Hong Kong.
However, weaker demand is now causing growth rates to decelerate, James said, adding CBRE envisages slightly lower rents in some areas next year although Central should prove more resilient given the lack of development in the area.
