London’s skyscrapers defy Brexit, as Hong Kong holds onto top spot

Hong Kong held its top spot in Knight Frank’s latest Skyscraper Index, but London’s commercial buildings are defying Brexit to retain its record rents.

The study, whch ranks the rental performance of commercial properties over 30 storeys around the world, is a revealing barometer of the current state of the world’s commercial real estate market.

Hong Kong’s towers continue to command the highest skyscraper office rents in the world as of Q2 2016, followed by high rise buildings New York City.

“As both cities have their core CBD on an island, the supply of land is highly constrained, so office rents are high,” explains the agency. “The long-term commercial success of both Hong Kong and New York also help explain the high rents commanded by their tower buildings.”

Rents for Shanghai skyscraper offices grew the fastest among the cities surveyed, with rents rising 7.6 per cent in the six months to June 2016. Sydney, meanwhile, emerged as rising business hotspot, with the Australian capital in second place at 6.6 per cent, ahead of Hong Kong’s third-place growth of 5.9 per cent.

Of the top ten cities ranked by rental growth, seven are in the Asia-Pacific region. Of the North American cities, Toronto saw the highest rental growth at 4.9 per cent.

London remains the most expensive city to rent an office in a tower in Europe, a strong performance that has occurred despite concerns surrounding the impact of the UK’s vote to leave the European Union upon London’s appeal as a global financial hub. Rents were unchanged in the first half of 2016, but remained at a record level for the city.

Will Beardmore-Gray, Head of Consultancy & Occupiers, Knight Frank, comments: “We have seen strong rental growth in London’s skyscrapers over the past two years, and rents remain resilient in spite of the economic uncertainty arising from the European Referendum result. Demand for space in London’s skyscrapers is undiminished with a number of deals done already in the second half of the year at very good levels.”

Singapore was the only global city where skyscraper rents decreased for the period, with the 7 per cent drop attributed to over-supply in the market.


Hong Kong overtakes London to become world’s most expensive office market

27th June 2016

Hong Kong has overtaken London to become the world’s most expensive office market. The latest rankings from CBRE see Hong Kong (Central) seize the top spot from London’s West End, which slipped to second place.

The other members of CBRE’s top 10 most expensive list were unchanged from its December survey, but Tokyo (Marunouchi/Otemachi) moved up one place above New Delhi (Connaught Place–CBD), and New York (Midtown Manhattan), the only Americas market in the top 10, moved up one place to No. 9.

Globally, prime office occupancy costs increased 2.4 per cent in the year ending Q1 2016, the same rate of growth reported in our prior survey. While the opening weeks of 2016 were turbulent times for global stock markets, the service sector, the principal occupier of prime office space, was not adversely impacted. Economic growth is expected to pick up in the coming quarters, which, coupled with limited development supply pipelines in most major markets, will translate into further increases in occupancy costs.

US markets are becoming more expensive, with costs in the Americas rising annually 2.3 per cent on average. Four markets — Monterrey, Atlanta (Downtown), Seattle (Downtown) and Atlanta (Suburban)— saw costs rise by double-digits. Several energy-centric markets experienced material drops in occupancy costs, including Calgary (Downtown and Suburban), Houston (Suburban) and Denver (Suburban).

Both Brazilian markets, Rio de Janeiro and São Paulo, saw declines.

In Asia Pacific, prime office occupancy costs, which reflect the highest-quality properties (typically the top 10 per cent of Grade A stock) are growing at a faster pace than average Grade A rents, up 2.7 per cent year-over-year compared to only 1.6 per cent annual growth for Grade A rents. Prime occupancy cost in some Chinese tier-one markets and Hong Kong either held firm or experienced year-over-year gains. Costs in Sydney and Melbourne were also up year-over-year. Several key Southeast Asian markets registered decreases, including Singapore and Jakarta.

Occupancy costs in EMEA increased 2.1 per cent year-over-year on an annual basis, on par with the 2.2 per cent gain seen in Q3 2015. Dublin, Stockholm and Barcelona were the fastest growing markets in the region. Most Central and Eastern European markets were down year-over-year, including Moscow, which is still in the midst of a recession.

London skyscrapers lead global rent growth

27th April 2016

Rents in London’s skyscrapers are towering over the global competition, according to Knight Frank’s latest Skyscraper Index.

The index, which compares rental growth in commercial buildings over 30 storeys tall around the world, found that London is racing ahead of the pack, with rents rising 9.7 per cent in the second half of 2015 – the second time in a row it dominated the biannual index.

San Francisco was the closest contender, but even America’s tech hub could not keep up with the UK capital, with rents only rising 4.76 per cent. San Francisco was ahead of Hong Kong, which saw rents climb 3 per cent.

Hong Kong, though, remains the most expensive skyscraper city in the world, with its rents now at $263 per square foot, as of H2 2015, ahead of New York ($155) and Tokyo ($129).

Singapore was the only city to see rents decrease in the second half of 2015, with rents falling 4.75 per cent, thanks to over-supply and diminishing confidence due to China’s slowing econony.

Over-supply could be a factor in London’s future performance, as the city’s skyline is set to be full of new towers in the coming years. Nonetheless, Knight Frank forecasts for growth to continue, due to “huge demand” for space in landmark, tall buildings.

London has competition, though: demand remains high in San Francisco too, as the US tech sector continues to expand rapidly, underpinning demand. A similar trend is now occuring in India as well, with Mumbai emerging as a top performer in Knight Franks’s index thanks to its growing tech industry – the sector surpassed financial and business services as the top occupier of office space in the second half of 2015.