A good indication of the how an economy is faring and if companies are booming is the amount of activity in the office market scene. The results of a Cushman & Wakefield report on 'grade A' office market rents from around the world offer an interesting snapshot.
Whilst Tokyo companies pay the highest rent for office space at $119.17 per square foot, this figure has declined 7.1% from a year ago.
Meanwhile, in Shanghai, office space rent is at $24.17, one of the lowest of the 13 cities surveyed. Yet that figure represents an increase of 27.5% from a year ago for the up-and-coming Chinese city.
Other Asian cities where office rents are on the rise are Hong Kong, with a dramatic 81.4% increase, and Beijing recording an 18.6% increase. In Hong Kong, there have been increases in sub-leased space and the decline in office take-up has resulted in landlords becoming more flexible with rental incentives.
Although the figures show a dramatic rise for some cities, the figures are still below previous peak figures. Hong Kong for example, is 31.1% below from previous highs and Shanghai is a significant 70.3% down.
Generally, the global downturn in economic growth has affected most office markets across the region resulting in this noticeable decline in leasing activity compared with last year. However, sub-leased space is on the rise across most markets, largely due to continued merger and acquisition activity plus a further disposal of space from failed dotcoms and other IT-related firms.
Cities where office rents are on a decline are Auckland (down 10%), Manila (down 9.1%) and New Delhi (down 8.9%).
The investment market has also been very quiet, with little change in capital values across most markets, according to Cushman & Wakefield. However, US-based Lone Star completed one of the largest investment transactions during the month by purchasing an entire office block in Seoul.
