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Connaught Place in New Delhi has the sixth most-expensive rentals for premium offices, among 20 major markets in the Asia-Pacific region, according to data from global real estate consultant, JLL. The average occupancy costs, including rent, taxes and service charges, in Connaught Place are at USD 142, which is higher than Pudong in Shanghai, Shinjuku in Tokyo and even Singapore. Among other Indian cities, the financial hub of Mumbai is ranked 14th with occupancy costs at USD 96. In 2017, Delhi and Mumbai were ranked third and 11th, respectively.
The rankings are based on the fourth edition of JLL’s Premium Office Rent Tracker (PORT) for 2018 that calculates data on the achievable rent in the highest quality buildings, in the premier office districts of 61 cities. With an 18 per cent on year increase in net absorption, at 23.4 million sq ft during January-September 2018, the commercial office sector in India continues to witness strong growth momentum. A combination of factors like strong economic fundamentals, demand for good quality Grade-A office space, institutional investments in commercial office assets, along with the co-working office trend catching up in key markets, are driving this double-digit growth, according to JLL Research.
Commenting on the report, Ramesh Nair, CEO and country head, JLL India said: “The commercial office segment is a strong growth driver for the real estate market in Delhi-NCR. Since the early 1990s and especially in the post-liberalisation era, Connaught Place has been one of the most preferred and sought-after office locations, by leading Indian and global corporates. This, coupled with limited supply of office space, its centralised location in the heart of Delhi, robust infrastructure and good connectivity, make Connaught Place the perfect destination for companies to have an office address.”
Samantak Das, head of research and chief economist, JLL India, added: “Driven by single-digit stable vacancies, steady lease rentals and high absorption, Connaught Place continues to be the premier and leading office market, for corporates from across a spectrum of different businesses. With the Delhi NCR market witnessing 25 per cent on year increase in net absorption at 3.2 million sq ft during the January-September period, we are quite optimistic about this growth trend continuing in the near-term, as well.”
Average total occupancy costs of the top 20 tracked markets in Asia-Pacific
|Country||Market||Total occupancy cost (USD)|
|1||Hong Kong||Hong Kong, Central||338|
|2||China||Beijing, Finance St||189|
|6||India||Delhi, Connaught Place||142|
|8||Hong Kong||Hong Kong east||122|
|16||Hong Kong||Hong Kong, Kowloon east||83|
|19||Vietnam||Ho Chi Minh City||59|
Hong Kong’s Central is the most expensive office market in Asia-Pacific
For the fourth successive year, Hong Kong’s Central has the world’s most expensive rent for premium offices, at USD 338. The occupancy costs are 60 per cent higher than New York’s Midtown and nearly 75 per cent more expensive than London’s West End, data from PORT shows. The high occupancy costs of Hong Kong’s Central are driven by Chinese firms snapping up Grade-A office space, although this demand has decreased in the last quarter. This has led some companies to search for more affordable offices, in decentralised locations. While Hong Kong east has traditionally been seen as a back office location by multi-nationals, it is increasingly being viewed as a prime office location.
Districts in cities in Greater China (Hong Kong, Beijing, Shenzhen and Shanghai) now represent six of the top 10 most-expensive premium office markets in Asia. As a result, decentralisation is taking place in many Chinese cities, as companies look to make savings, with premium occupancy costs averaging USD 338 per sq ft in Hong Kong’s Central, USD 189 per sq ft in Beijing’s Finance Street and USD 131 per sq ft in Shanghai’s Pudong district. Meanwhile, Singapore made its way into the top 10 for Asian cities, up from 14th place in 2017.
Banking and financial services firms account for the top occupiers
The banking and financial services industry are the top occupiers of premium office space globally, as the leading sector in more than half of the 72 markets covered. “High-value, high-margin businesses in financial services, such as private, corporate and investment banking firms, rent premium office space in Beijing, Shanghai, Tokyo and Singapore. While cost remains a key factor, these companies prioritise access to talent and the need for amenities, when selecting their next office location. They target premium quality buildings to attract and retain top talent, which also helps to enhance their brand image,” said Jeremy Sheldon, managing director, markets and integrated portfolio services, JLL Asia-Pacific.
Corporate occupiers across all industries are seeking to consolidate and streamline their portfolios in strategic locations. There is growing recognition of the role that real estate plays in talent attraction and retention. Hong Kong’s Central is a prime example, for its excellent transport connectivity, local amenities and the quality of digital infrastructure – factors that organisations consider, when choosing their next office location.
JLL’s Premium Office Rent Tracker compares like-for-like occupation costs across 72 major office markets in 61 cities.
Premium office rents refer to the ‘top achievable’ in units over 10,000 sq ft (or approximately 1,000 sq metres) in the premium building in the premier office district of each city. In tall buildings, the middle zone is used as the benchmark. The report excludes rents that represent a premium level paid for a small quantity of space, or highly prestigious units where a significant premium applies.
Total occupancy costs are calculated by combining the net effective rent with additional costs (e.g., service charges, taxes).