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LOS ANGELES, May 05, 2010 (BUSINESS WIRE) -- London's West End remains the world's most expensive office market, according to CB Richard Ellis Group, Inc. (CBRE) Global Research and Consulting's semi-annual Global Office Rents survey. Hong Kong's Central Business District (CBD) has risen to second place pushing Tokyo's Inner Central to third place. Mumbai is now in fourth position on the list while Moscow remains in fifth in the CBRE rankings, which tracks occupancy costs for prime office space in 176 cities around the globe.

Office occupancy costs measured in U.S. dollars are affected by changes in the dollar's value versus the respective local currency. Hence, office occupancy costs when converted into U.S. dollars are driven by both the local market dynamics of supply and demand, as well as currency changes.

"We have found that currency fluctuations play a big role with regard to where markets rank in the top 10 for office costs," said Dr. Raymond Torto, CBRE's Global Chief Economist. "However, the 'most expensive club' still includes the usual names -- London, Hong Kong and Tokyo."

The report also found that on a year-over-year basis, global occupancy costs are searching for a bottom, with the markets monitored revealing a collective drop of -4.6% worldwide over the 12-month period ending March 31, 2010. Larger markets experienced a slightly greater decline of -6.4%. The majority of markets (133) experienced a decline, with 33 of these markets registering double-digit percentage-point drops in office occupancy costs. 53 markets experienced annual increases in occupancy costs, generally smaller markets affected by quality shifts in key market assets...

... North America is led by Midtown New York, which posted an office occupancy cost of US$64.51 per sq. ft. While office occupancy costs in Midtown New York are high for North America, that market ranked just 26th globally.

North America saw a below-average decline of -3.3% (year-over-year), making the region the third weakest with falling occupancy costs in 51 out of 77 markets. The largest declines were in Calgary CBD (-24.9) and New York Downtown (-19%).

Top Ten Most Expensive Markets
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(In US$ per SF per annum)              US$/SF/annum
  1.) London West End, United Kingdom     182.94
  2.) Hong Kong (Central CBD)             153.20
  3.) Tokyo, (Inner Central), Japan       143.99
  4.) Mumbai, India                       125.76
  5.) Moscow, Russian Federation          125.10
  6.) Tokyo (Outer Central), Japan        118.41
  7.) Paris Ile-de-France, France         113.23
  8.) London City, United Kingdom         110.07
  9.) Dubai, United Arab Emirates         108.92
  10.) Sao Paulo, Brazil                  100.00

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Bloggers note: It is interesting to see that the major US office space leasing markets are no where close to the top ten in office space rent costs. Midtown Manhattan is only just over 1/3 of the cost of number one London office space rental rates. The other interesting location in the top ten is Mumbai, India, still nearly double the cost of Midtown Manhattan.

Nasdaq 4/30/10 - Corporate America has 25-50% more space than it actually needs, particularly as tenants move toward more open floor plans, more staff work remotely and companies reduce costs by cutting the amount of space allocated per person. That's the view of Howard Ecker , president of Chicago-based tenant representation firm Howard Ecker & Associates . "Companies have gone from offices to cubicles and now they are going to benching," he said.

Space per person has been in the news lately, with Goldman Sachs reducing its space per person from 228 to 178 square feet and famously putting a number of less-senior executives in internal offices without windows when it moved to its new headquarters building in New York. But Goldman isn't the only one. Over the years, law firms have gone from 750 square feet per lawyer to 500. "They are now going down below that," Ecker said. Advertizing agencies once had 250 square feet per person and now have less than 100, he added.

Bob Stella , president of New York-based tenant representation firm Cresa Partners , said more companies have staff that telecommute or use hoteling, where more than one staffer uses the same workspace. "All companies are looking at ways to be more efficient. It's possible to create a great working environment and do it with less space," he added. "You can virtually be working on your laptop from home and perform a lot of the same tasks."

Although the office market isn't there yet, Ecker believes that changing demographics will have the biggest impact on office space needs and cited the emergence of the Echo Boomers, or the Millenials, who are entering the workforce. "Four percent of the workplace is 65 and older and 50% is 45 and under. As they disappear and younger people start to make decisions, the complexion of the office environment will change," he said. "The younger the decision maker, the less space they will take."

In an extreme case, the need for less space could ultimately stamp out new office development, Ecker said. "If we have 25-50% more space than we need, why build another office building? A lot of people say they have to be in new buildings because they are more efficient. But new buildings aren't inherently more efficient," he said. Finally, using less space is also a much greener option. "Green is a really big issue today. The U.S. government can't lease space in a building that isn't LEED certified and they are leading the charge into efficiency," he said. "The greenest thing that can be done is to use less space."

Source: NASDAQ.com