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By Melissa Securda
CB Richard Ellis recently released their Global Market Rents Report highlighting the top 50 strongest rental markets and the top 50 cities with the highest occupancy costs.
Not surprisingly, most of the top 50 finishers on the rental side are located in Europe, the Middle East, or Asia. London’s West End tops the list with the highest rents at $299.54 per square foot per year followed by Moscow, Russia at $232.37 per square foot per year and Tokyo, Japan at $220.25 per square foot per year. Midtown Manhattan ranked 13th with rents for prime office space reaching $103.43 per square foot per year.
The reason these cities top the list? Location. Location. Location. Constricted supply and consistent tenant demand for these locations keeps rents high. How high will they go? What impact will the global financial crisis have on rents in these markets as well as the markets already suffering from falling rents and decreased tenant demand? The answers remain to be seen, however there will be some leveling off of the upward rental trend in certain markets.
CBRE’s report also ranked the 50 cities with the fastest growing occupancy costs, and overall, the figures are 11.3 percent higher than last year, even taking world inflation into account. Ho Chi Minh City topped the list with a 94.4 percent increase over last years’ figures. Moscow and Singapore followed with 92.7 percent and 86 percent, respectively.
The reason costs are rising so quickly? These cities are experiencing robust economic growth and urbanizations. In many instances, the cities near the top of the list are located in emerging or developing markets and going forward rising construction and labor costs as well as inflationary influences will continue to keep gross occupancy costs on the rise.
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