By Jonathan Roberts

Source: JLL
Source: JLL

SINGAPORE may be the world’s most expensive city, but when it comes to the priciest office, another Asian island city has snatched the honour.

Recently, a Worldwide Cost of Living report for 2016 has named Singapore as the most expensive city in the world to live in. However, the second runner up in the list, Hong Kong, has managed to top Singapore with the most expensive office space.

According to JLL’s latest Global Premium Office Rent Tracker, Asian cities made up the bulk of the list – six out of ten cities recorded high rental rates despite only three cities made it into the list of highest living cost.

Topping the list with a significant lead was Hong Kong, where the price of a premium office space in Hong Kong’s Central District was more than 50% higher than the rates offered in London and New York.

The rental rate of Hong Kong’s office space hit a record high of approximately RM1,300 (US$302) per sq ft per year to rent, a 15% increase from a year ago. The factor driving this price surge was mainly due to a strong demand with a shortage of supply, as companies from Mainland China looked to grab a foothold in Hong Kong.

Top 10 Most Expensive City Districts for Renting Office Space
1. Hong Kong, Central
2. London, West End
3. New York, Midtown
4. Beijing
5. Tokyo
6. Shanghai
7. Delhi
8. San Francisco
9. London, City
10. Hong Kong, Island East

Source: JLL

Hong Kong’s top position is a testament to its attraction as a “globally fluent” business hub with a range of internationally recognised strengths.

Its Central District has seen robust growth in premium rents over the past 12 months on the back of demand from mainland Chinese firms and very limited supply.

However, affordability and lack of available space are concerns that are likely to accelerate decentralisation to nearby growing core districts.

The advent of the Brexit vote has seen corporate occupiers adopt a more cautious approach until a clearer political and economic circumstances appear. The cost in U.S. dollar terms are between 15% to 20% lower than a year ago largely due to a combination of sterling's depreciation and a reduction in net effective rents. A further downward pressure may push London rents down to third position in 2017.

China’s big cities – namely Beijing and Shanghai – have slipped marginally in the ranking. While the rates for premium rents in both cities maintained, the fall in the global ranking were caused by outperformance from New York and Tokyo respectively.

Tokyo’s upward movement is supported by high leasing activity and large ticket pre-commitments. On top of that, the strengthening of the Japanese yen steered its capital city into fifth position.

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