Hong Kong fails to reclaim top spot in office rental costs

Hong Kong's quest to reclaim the mantle of the world's priciest office market has just got tougher, with a survey showing the pace of rent rises in Central trailed that of London.

While occupancy costs in Central rose 3.4 per cent to US$242 per square foot a year over the six months to March, London's West End jumped 6.8 per cent to US$277, a survey by CBRE found. Occupancy cost in Central stood at US$234 in September last year.

The West End unseated Hong Kong as the most expensive office location in the third quarter of last year, the survey found.

CBRE said Central remained the only market other than London's West End to achieve an occupancy cost of more than US$200 per square foot per year.

West Kowloon dropped one spot to sixth place amid an 8 per cent decline in occupancy costs to US$160.83 per square foot per year due to the addition of new office space, prompting caution among tenants.

However, costs in Hong Kong's two main office markets were likely to increase in the coming months, the report said.

"Overall demand for office space in Hong Kong continues to strengthen, with signs of increasing demand from the finance sector and mainland companies," said Rhodri James, executive director of office services at CBRE Hong Kong.

"On the back of an improved global economic outlook, coupled with the recent announcement of direct stock trading between Hong Kong and Shanghai, Hong Kong will be able to enjoy a more competitive advantage over its key rivals as a regional hub for key financial and business multinational companies."

Beijing's Financial Street district ranked third in the survey with an occupancy cost of US$194 per square foot, while its central business district was next with US$187.

Midtown in New York saw occupancy costs unchanged at US$120.65 per square foot per year, in 11th place.