Sydney moves up in office space cost ranking

Sydney moves up in office space cost rankingSydney’s CBD is again among the 10 most expensive locations worldwide for office real estate, according to Cushman & Wakefield’s annual ‘Office Space Across the World’ global ranking.Australia’s costliest office space market, Sydney’s CBD, moved up one ranking to ninth in the annual global survey.London took out top ranking for the third year running, followed by Hong Kong, New York City, Rio de Janeiro, New Delhi, Moscow, Tokyo, Beijing, Sydney and Paris.Top 10 Most Expensive locations by country20142013CountryCityLocationOccupancy Costs (sqm/year11UKLondonWest EndUS$284222Hong KongHong KongCBDUS$198035USNew YorkMidtownUS$141046BrazilRio de JaneiroZona SulUS$138857IndiaNew DelhiConnaught PlaceUS$129263RussiaMoscowCBDUS128174JapanTokyoCBD (5 Central Wards)US$127089ChinaBeijingCBDUS$1120910AustraliaSydneyCBDUS$1066108FranceParisCBDUS$1044Source: Cushman & Wakefield “As foreign capital continues to pour into the Sydney office market, we believe the cap rates for prime office stock will compress further and the yield spread between prime and secondary assets [will widen],” said Dr Alex Pham, national research manager for Cushman & Wakefield Australia.”In regards to the space market, while the current market condition remains soft, we expect to see some improvement for the Sydney occupancy market underpinned by favourable monetary policies.”In the Asia-Pacific region, Sydney CBD office space ranked fifth for most expensive locations by city, at US$1065 per sqm (compared with top-ranking Hong Kong’s US$1980 per sqm), ahead of Shanghai, Singapore, Mumbai, Shenzhen and Jakarta.And 2015 should bring further rental growth to core cities in the region, suggested John Siu, managing director of Cushman & Wakefield in Hong Kong. “Leasing activity across [the] Asia-Pacific continues to strengthen, but to a varying degree,” Sui said. “With pent-up demand in some of the core locations and service sector growth positive, 2015 is expected to see further rental growth in most of the gateway cities of the region.”The majority of core markets are seeing vacancy rates below 7 per cent and will thus be able to sustain some new development while maintaining rental values, noted Cushman & Wakefield in a press release.”There are, however, a few exceptions to this: namely certain second-tier Chinese cities and key Australian cities, where existing supply plus new construction will put pressure on rental growth,” it said.Sigrid Zialcita, managing director of research for Cushman & Wakefield Asia-Pacific,said office leasing markets in the Asia-Pacific region should remain healthy in 2015, with low, single-digit rent growth expected across the top 30 cities tracked. For core Asia-Pacific markets, Grade A rents are forecast to rise another 1 to 2 per cent over 2015 as prime supply tightens.”While supply pressures are likely to restrain rentals in some markets, we believe Sydney would continue to gain momentum as government policy supports growth and sustains positive sentiment,” Zialcita said.To read the report click here