Perth has the most expensive office space in the Pacific region, despite a fall in office rentals, according to the CB Richard Ellis' semi-annual Global Office Rents survey.
Perth has the most expensive office space in the Pacific region, despite a fall in office rentals, according to the CB Richard Ellis' semi-annual Global Office Rents survey.
Perth ranked 35th in the CBRE survey.
This was despite also experiencing the sixth-largest decline in rents in local currency, at negative 15.8 per cent.
Sydney was the only other Australian market to make it into the top 50, ranked 39.
CBRE executive director, global research and consulting, Kevin Stanley said the CBRE survey recorded the movement in the rankings between the March and September quarters of 2010.
"Perth was the most expensive office market in the region," he said.
"While rents in Perth have fallen about 4.0 per cent through the middle of the year, the rise in the value of the Australian dollar against the US dollar has held the market steady in the rankings," said Mr Stanley.
The CBRE report tracks the world's most expensive office markets as well as those with the fastest changing occupancy costs.
"The largest fall was in Perth which, although the market has now stabilised, suffered falling rents up until the June quarter, 2010," said Mr Stanley.
See statement from CBRE below:
Perth has maintained its position as the most expensive office market in the Pacific region - despite a significant fall in the city's office rentals - according to CB Richard Ellis' semi-annual Global Office Rents survey.
London's West End continues to be the world's most expensive office market, with Hong Kong's Central Business District in second place, having also recorded the fastest year-over-year occupancy cost rise with a 34.2% increase.
At US$59.63 per sq. ft., Perth was ranked 35th in the CBRE survey, despite also experiencing the sixth-largest decline in rents in local currency, at negative 15.8%.
Sydney was the only other market to make it into the top 50 list of the worlds most expensive markets, slotting in at #39 and moving up from #42 earlier this year. That was despite rents being effectively stable in Sydney through most of 2010.
CBRE Executive Director, Global Research and Consulting, Kevin Stanley said the CBRE survey recorded the movement in the rankings between the March and September quarters of 2010.
Through this time the Australian dollar appreciated 5.4% to the US dollar, while the New Zealand dollar appreciated 3.8% to the US dollar. This appreciation helped push markets from the Pacific Region up the rankings, even when local rentals had fallen.
"In other words, by US dollar terms, office markets in the Pacific Region are becoming more expensive," Mr Stanley said.
"Perth was the most expensive office market in the region. While rents in Perth have fallen about 4.0% through the middle of the year, the rise in the value of the Australian dollar against the US dollar has held the market steady in the rankings."
The biggest mover up the rankings was Brisbane, going from #74 in May 2010 to #60 in November. This was helped by a recent rise in the cost of outgoings which limited what otherwise would have been a larger fall in rents during 2010.
Adelaide was another strong performer during 2010. An effectively stable rental environment between May and November 2010 was enough to see the Adelaide market move up 13 spots on the global rankings of the most expensive markets to position # 94.
"Melbourne has also been a notable mover up the rankings of the world's most expensive office rents," Mr Stanley said.
"Melbourne increased its ranking eight spots, to now be at #77. A rental increase of just 2.8%, coupled with the rise in the value of the Australian dollar over the same period, was enough to see this solid result."
The CBRE report tracks the world's most expensive office markets as well as those with the fastest changing occupancy costs.
The fastest changing rankings are determined by the change in rents over the last 12 months. Like the rest of the world, when measured this way, most rents in the Pacific Region continued to record a negative change in the 12 months to September 2010.
The largest fall was in Perth which, although the market has now stabilised, suffered falling rents up until the June quarter, 2010. At the other end of the scale, Mr Stanley said the most positive story had been the turnaround in rents in Melbourne.
"In the 12 months to September, 2010, Melbourne rents increased 4.5%, which may sound humble, but this was the 22nd fastest growing in the world and the fastest growing in the Pacific Region," Mr Stanley said.
"This is a swift turnaround from the -4.6% recorded in the 12 months to March, 2010. CBRE expects Melbourne, Adelaide and Sydney to be the first office markets in the region to record rental growth in the recovery already underway."
On a global basis, Dr Raymond Torto, CBRE's Global Chief Economist said major markets in emerging economies featured prominently at the top of the list of most expensive office costs as measured in dollars per square foot.
"This pattern developed just a few years ago and it is more pronounced today," Dr Torto said.
The survey found that on a year-over-year basis, occupancy costs are beginning to find their cyclical lows worldwide. Ninety-nine of these markets -- still a majority -- experienced decline, with 19 still registering double-digit percentage-point drops over the past 12 months. However, sixty-one markets saw occupancy costs for the year rise. Occupancy costs in fifteen markets were unchanged during that time period. The year-over-year change in office occupancy costs for the 175 markets monitored revealed a drop of only 1.3% worldwide.
Among the markets exhibiting the most significant gains were markets such as Hong Kong (Central CBD), London City and São Paulo. Markets that posted more moderate gains included Paris, Shanghai and Washington, D.C.
While comparisons in dollars are affected by currency exchange rates, annual percent change calculations are based upon occupancy costs in local currency and measurement and not influenced by currency changes.
Asia-Pacific
Asia Pacific once again had 13 markets rank in the top 50 most expensive, with three of the top five (Hong Kong Central CBD, Tokyo Inner Central and Mumbai) most expensive markets. Hong Kong (Central CBD), with an occupancy cost of US$184.21 per sq. ft. (up from US$153.20 per sq. ft. six months ago), was first in the region followed by Tokyo's Inner Central, with an occupancy cost of US$158.08 per sq. ft. Mumbai, with an occupancy cost of US$130.41 per sq. ft., ranked third in the region.
The most expensive market in the global ranking from the Pacific Region was Perth (US$59.63 per sq. ft.), which came in at 35th, despite also experiencing the sixth-largest decline in local currency, at negative 15.8%.
Asia Pacific has shown measurable improvement over the past six months, led by substantial year-over-year occupancy-cost increases in Hong Kong (Central CBD), Hong Kong (Citywide) and Beijing, with gains of 34.2%, 23.9% and 11.5%, respectively. More than half of the markets in the region are now posting gains in occupier costs compared to a year ago. Increased economic activity in the Pacific Rim has bolstered demand, and increases in the strength of the Chinese yuan allowed costs to rise relative to other markets. Twelve of these markets experienced declines and 13 markets saw occupancy costs for the year rise.
Europe Middle East & Africa (EMEA)
EMEA continues to have the most markets on the top 50 list with 30 markets. London's West End is still the world's most expensive market with an occupancy cost of US$193.69 per sq. ft., up from US$182.94 per sq. ft. six months ago. Other markets in the region that top the list are Moscow (occupancy cost of US$128.33 per sq. ft.), London (City) (US$124.59 per sq. ft.), Paris (US$115.72 per sq. ft.), and Dubai (US$95.32 per sq. ft.).
EMEA showed some signs of stabilization as the Eurozone recovery continued. Less than one-third of all EMEA markets posted occupancy cost gains. London City posted the largest gain for the region as its occupier costs grew by 17.5%, followed by Tel Aviv (13.4%). The largest declines were again among markets impacted by real estate overbuilding and speculation, such as Dubai (-12.5%) and Dublin (-12.4%). Twenty-eight of these markets experienced declines and 16 markets saw occupancy costs for the year rise.
Americas
North America is led by Midtown New York, which posted an office occupancy cost of US$66.59 per sq. ft. While office occupancy costs in Midtown New York are high for North America, that market ranked just 26th globally.
North American markets, for the most part, have not seen occupancy costs begin to recover yet. Less than one-third of North American office markets experienced increases in occupancy costs over the past year. Atlanta (CBD) experienced the largest year-over-year increase, at 7.0%. New York, the largest office market in the U.S., saw occupancy costs decline by 7.6% (Downtown) and 4.5% (Midtown). Fifty-five of these markets experienced declines and 21 markets saw occupancy costs for the year rise.
In Latin America, São Paulo, which ranked just ahead of Rio de Janeiro, remains the most expensive market, posting an office occupancy cost of US$109.03 per sq. ft. São Paulo now ranks as the 9th most expensive market globally. Meanwhile, with an occupancy cost of $104.40 per sq. ft., Rio de Janeiro has moved into the global top 10 on the strength of its local premium office market combined with the appreciation of the Brazilian real against the U.S. dollar over the past year.
Latin America is holding up better than the rest of the world and continues to post gains. Of the region's 15 markets, only four experienced declines. Brazil saw the largest increases, in São Paulo (26.9%) and Rio de Janeiro (13.7%). Brazil's recovery began in 2Q 2009, so the annual change is reflective of the trough for that country's office market.
