London retains crown as global property costs capital

For the seventh consecutive year, London’s West End has retained its position as the world’s most expensive office location. London (City) was ranked number four.

DTZ’s tenth annual Global Office Occupancy Costs (GOOCs) Survey 2007, published today, is a guide to total occupancy costs across 131 business districts in 46 countries worldwide divided into six regions. Ranking is on a workstation basis.

Global economic growth has sustained demand for office space in key business districts in 2006. London and Western Europe continue to dominate the top ten places for the most expensive office occupancy locations, but North America accounted for the most number of increases. New York City (Downtown) climbed 25 places to be the 15th most expensive location in the world, recording a 63% year-on-year (YOY) increase to USD 12,310 per workstation. Seventy-six per cent of locations surveyed posted increases in occupancy cost per workstation.

The top ten most expensive office locations by occupancy costs in the 2007 survey:

1. London West End USD 23,260
2. Hong Kong USD 19,730
3. Paris USD 17,770
4. London City USD 17,690
5. New York (mid-town) USD 16,400
6. Dublin USD 15,810
7. Washington DC USD 14,580
8. Tokyo USD 13,470
9. Frankfurt USD 13,410
10. Geneva USD 13,070

Average space utilisation increased by 1% in North America and remained highest amongst the six global regions at 22 square metres, while Asia Pacific and Western Europe dropped marginally by 1% to 13 square metres and 18 square metres respectively.

Globally, Western Europe remained the most expensive region at USD 9,980 per workstation, and the premium over North America (USD 7,570) increased from 31% in the previous year to 32% in 2006. All six regions posted increases in occupancy costs, except Central & South America, where costs remained stable.

In Asia Pacific, high levels of absorption, coupled with limited new supply, led to increased occupancy costs; and where leases are expiring, companies are experiencing a significant increase in costs at core locations. Consequently, some companies are considering moving to secondary buildings in good locations, or fringe areas, with accesses to mass transport routes. Demand for office space is particularly marked in India, where Mumbai is now the fourth most expensive in the Asia Pacific region at USD 11,390.

In Western Europe, where costs have in part increased due to a stronger euro, London (West End), Paris and London (City) remained the top three most expensive locations. The Dublin office market remained buoyant, increasing to USD 14,740 and Munich, reflecting the recovery in the German market, recorded a 12% YOY increase to reach USD 12,500. Regional ranking for Central & Eastern European cities remained similar to occupancy costs in 2005, though Kiev (USD 7,350) posted a 28% YOY increase, as a result of rapid business growth and excellent prospects for the Ukrainian market.

In North America, 87% of locations became costlier, especially those in the top ten, as a result of demand, particularly in the USA. Canada’s locations recorded mixed results, with Toronto recording a 6% drop.

In the Middle East and Africa, Doha (USD 11,370) and Kuwait City (USD 8,220) continued to lead the market and many occupiers are re-visiting their location preferences due to spiralling occupancy costs and general congestion in prime areas. Many are resorting to taking leases in large villas away from the established central business districts to satisfy their requirements.

James Maddock, DTZ's director of global corporate services says: “London’s dominance of the market has become a regular feature of this survey, and there is little to indicate that this will change in the foreseeable future. The challenge for occupiers will be how to retain flexibility in their leases to cater for changing business needs and also how to keep costs low in an increasingly supply starved global market. A separate issue that is likely to become more pressing, particularly in the US market, will be how corporates deal with their carbon footprint and environment responsibilities and what effect this will have on their overall occupation standards in the future.”

The outlook for Western European occupancy costs in 2007 are expected to be stable, whilst costs are predicted to rise in 84% of North American markets. The Central & Eastern Europe and Middle East/Africa regions are split between positive and stable outlook.