Hong Kong lags London in office leasing costs

Hong Kong lost its position as the world's most expensive place to lease an office to London's West End last year as tenants fled pricy Central for more affordable areas.

A study by property consultancy DTZ found annual grade A office occupancy costs in Hong Kong dropped 12 per cent year on year to US$22,190 per workstation in 2012, the second-most expensive in the world.

The figure dropped mainly because high rents and the stormy world economy forced tenants to cut costs by downsizing or moving outside the central business district.

"There is new supply in areas outside [the CBD] such as Hysan Place in Causeway Bay and other offices in Kowloon East. Companies that need a lot of floor space and don't need to stay in Central moved to other areas to lower occupancy costs," said David Ji Yanxun, head of Greater China research at DTZ. He said 1.5 million square feet of new office supply was added in Hong Kong last year, most of which was in Kowloon East.

"Hence rents in Central softened last year," Ji said, adding that worries over the global economy also caused tenants in Central to try to cut operating costs.

London's West End reclaimed its title as the world's priciest district despite its rents remaining stable last year at US$23,500 per workstation annually, the report found. Geneva was third and Tokyo fourth.