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Boston rises to 3rd in US and 11th globally in report of global trophy space
BOSTON, Dec. 2, 2016 – Hong Kong and London retained their spots atop the world's priciest premium office markets while New York replaced Beijing in the third spot, according to JLL's latest Premium Office Rent Tracker. Boston raised its position to 3rd in the United States and 11th worldwide, where recently completed 888 Boylston Street has set a new rental benchmark.
The report, which compares like-for-like occupation costs across 35 markets in 31 cities worldwide, shows a tightening amongst the world's premier markets over the past year as well as a significant uptick in rents in the priciest cities.
"New deliveries have pushed the high water mark for premium office rents in Boston this year. Boston's rise in the ranks is evidence of the strong economic momentum and the strength of the diverse tenant base that fuels the market. With limited availability in the new supply underway, rents in Boston's premier locations will not ease up as growing companies continue to seek these locations," said JLL Research Director Lisa Strope.
Supply crunch boosts Hong Kong rents Hong Kong's Central submarket occupancy cost for premium office space reached new heights at US$302 per square foot per year, which includes extras such as service charges and property tax. That's up from US$262 a year ago. Prices were again pushed up by strong demand and an extreme supply shortage, resulting in a miniscule vacancy rate of just 1.5 percent in Hong Kong, second only to the 1.4 percent vacancy in Beijing's Finance Street submarket.
While Hong Kong Central's top spot in the ranking is not new, its sizeable lead over the rest of the field is. Occupancy costs for premium space in Hong Kong Central are now in excess of 50 percent greater than either London or New York as companies from mainland China look to Hong Kong for top office space. But that robust rent growth could plateau with surrounding submarkets offering more than 50 percent discounts to prime.
U.S. markets rise while London moderatesMidtown New York overtook Beijing as the world's third most expensive premium office market with total occupancy costs edging up to US$194, compared to $US171 last year. New York saw more than 10 percent rent growth, outperforming China's Alpha cities Beijing and Shanghai.
"We continue to see upward rent pressure on the most coveted office space as vacancies shrink and the nation's gateway cities wrestle with how to best strike a balance between prestige and affordability," said JLL International Director Christopher Roeder. "Moderating rent growth in San Francisco is an example of the challenges these cities face."
San Francisco fell by one position to eighth as rent growth there showed signs of softening. Boston moved up the ranking four spots and cracked the top 12 for the first time, while Washington, D.C. remained stable in 13th place.
Premium rents in London's West End saw a reduction of 15 to 20 percent from a year ago as hedge funds and private equity firms adopted a wait-and-see approach following the Brexit vote.
"These high value financial occupiers that typically pursue premium office space in the West End core markets have turned to a cautious approach in their leasing strategies as they wait for more economic clarity following Brexit," said Neil Prime, JLL's Head of UK Office Agency.
About JLLJLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. JLL is a Fortune 500 company with, as of December 31, 2015, revenue of $6.0 billion and fee revenue of $5.2 billion, more than 280 corporate offices, operations in over 80 countries and a global workforce of more than 60,000. On behalf of its clients, the company provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. As of September 30, 2016, its investment management business, LaSalle Investment Management, has $59.7 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
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