Commercial Real Estate

This city may lose its skyscraper crown

Can NYC leapfrog HK to take skyscraper crown?
Can NYC leapfrog HK to take skyscraper crown?

Skyscraper rents in Hong Kong are still the world's highest, but the city is in danger of losing its crown to New York, Knight Frank said.

"New York is closing fast," Knight Frank said in a report Wednesday. "While Asia may be building apace, economic recovery in the U.S. is buoying demand for towers from investors and tenants in the big North American cities."

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Hong Kong's office skyscraper rents are around $250 a square foot, up 11.3 percent from July 2014, boosted by a low vacancy rate and limited space in the central business district (CBD), the report said. But New York's skyscraper rents surged 20 percent over the same period to $150 a square foot.

New York's One World Trade Center, the tallest building in the Western Hemisphere
Spencer Platt | Getty Images

In its skyscraper index, Knight Frank scored Hong Kong at 131.4, while New York was at 126.6; the index scores cities on indicators including skyscraper office rents and yields, the number of high rises built and growth prospects.

"Economic growth prospects for this year favor locations like New York and London, so I see these cities stepping up competition on the Asian centers," James Roberts, chief economist at Knight Frank, said in a statement. "Many people like to say that the balance in the global economy is shifting from west to east, but certainly skyscraper rents provide another indicator that shows this is not entirely the case."

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"To accommodate economic and population growth a city can either move outwards or upwards. Moving outwards breaks up business clusters, and creates political problems, like allowing development on green fields around cities," the report said. "This moves the pendulum of debate in favor of building upwards to provide more homes and business space."

Knight Frank also believes taller buildings can help improve employee retention, in part by cutting commuting times as people have been eschewing the suburbs and moving back into cities.

Mega-funds have also been targeting skyscraper investments, the report noted, citing Blackstone's purchases in New York of 1740 Broadway and the Park Avenue Tower for a total of around $1.1 billion.

"Skyscrapers allow sums over the billion dollar mark to be invested in a single deal," the report said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1