Limited availability and strong demand from Chinese corporations pushed Hong Kong office space costs up 5.5% to $27,431. In contrast, costs in London have fallen 19% since 2016 - largely as a result of currency depreciation - to an average of 22,665 per workstation per annum. Paris, also in the top 10 - albeit nearly half the cost of London - saw costs fall, too.
Escalating rents have driven a growing number of multinational corporations to decrentralize to lower cost areas. As a comparison, for the same cost of accomodating 100 staff in a Hong Kong office, 300 can be accomodated in Toronto, 500 in Madrid, and 900 in Mumbai.
At a global level, the average annual cost per workstation rose by 1.5% over the past 12 months. The cost was driven by the Americas, where costs increased by 4.2%, and Asia Pacific, where they rose by 3.4%. EMEA posted a fall of 1.3% in the same period. Currency fluctuations have produced some of the biggest changes in rankings. For companies looking at their total costs, this factor will exercise them more than property markets over the next year.
Along with rising occupancy costs, workplace density - the number of workers within a given office space - also increased at a global level in 2017. Employers, especially in traditional "power cities" like New York, London, Tokyo and Hong Kong, want to be as efficienct as possible to accomodate rising workplace populations and get the best value from increased occupancy costs.
There are discernable trends affecting the rankings of office markets. The phenomenal growth of the technology sector spawned a new generation of firms less wedded to traditional power cities than banks and financial institutions. Technology also enables employees with a laptop and internet connection to work anywhere, changing the corporate landscape as central office buildings increasingly assume a different role in fostering collaboration.
As workstation costs rise, it's crucial that employers get the most out of their workforce by providing work environments to help attract and retain the best talent in a globally competitive marketplace. There's a tipping point when density is too high, or the amount of collaborative space is too low. Both can be a hindrance to people getting their work done. As competition heightens between space and cities, consideration of user experience and employee well-being is imperative.
In the longer term, we expect there will also be some rebalancing of occupancy costs across the world as talent and business orientate towards emerging economies.
The above is an excerpt from the Occupier Edge Sixth Edition. Download the full report here.