Hong Kong has unseated London as the world’s most expensive place to take up office space, highlighting the growing appetite from banks to increase their presence in Asia.
The cost of renting prime office space in the island state soared 28 percent during 2011 to £97.11 per sq ft a year, according to research from Knight Frank, the property services group.
The rise, the sharpest of all the established financial centers, comes as the financial services industry’s focus on Asia drives down vacancy rates across the continent’s main office markets.
The importance of the Asian market was further underscored by the rapid rise in Beijing office costs, which leapt 46 per cent during the year to £36.27 per sq ft to become the world’s 19th most expensive market.
The rise in rental costs across mainland China and Hong Kong is in stark contrast to the majority of European markets, where office rental growth stalled during the second half of 2011 as concerns about the eurozone crisis saps business’ appetite for taking up new space.
Even in London, which is seen by many property investors as a haven from the turmoil in Europe, demand for top-quality office space, having risen strongly during the first half of 2011, slowed during the autumn to end the year at £92.50 per sq ft.
The slowdown has pushed some property developers to mothball office projects until demand returns.
“Office occupiers remain cautious in many international markets, particularly with concerns over the strength of the global economy and the future of the eurozone resurfacing in recent months,” said Matthew Colbourne, senior international research analyst at Knight Frank.
“The pace of prime office rental growth in Europe slowed significantly in the second half of 2011, with rents remaining essentially flat in markets such as London’s West End and Frankfurt,” he added.
In spite of the strong growth in many Asian markets during 2011, Mr Colbourne warned, however, that cities that were too dependent on uptake from international financial services companies could experience a slowdown in demand in 2012.
In the US, San Francisco was the best-performing market with demand from technology companies helping to drive up prime office rates by 24 percent to $37.75 per sq ft a year (£24.42).
The increase was more than double that in Manhattan, where rents increased by 12 percent to $64.36 per sq ft (£41.64 per sq ft).