Concrete Analysis | Hong Kong cheaper than Beijing, Tokyo when it comes to cost of setting up offices, says CBRE

While Hong Kong has made headlines for having the most expensive prime office rents in the world, it is wrong to assume that it is the costliest location for businesses to set up their offices. Recent research by CBRE sets the record straight by uncovering that leasing costs account for less than half of a business’ all-in office investment.

By analysing leasing costs, operating costs and the capital expenditure incurred in office investments across 25 major cities in Asia Pacific, Hong Kong actually comes in third in the region, following Tokyo and Beijing, according to the Asia Pacific Cost Guide 2017/2018 by CBRE.

Focusing on the headline office rents alone oversimplifies the various costs that need to be taken into consideration when managing a real estate portfolio. The Cost Guide provides a tangible model for occupiers to better estimate real estate costs over a five-year period by computing the leasing cost (47 per cent), fit-out cost (44 per cent), reinstatement cost (6 per cent) and facility management cost (3 per cent).

The guide reports that a company leasing a 30,000 sq ft grade A office in Hong Kong needs to invest US$18,624,165 in total, or US$621 per square foot, over the course of five years, compared to US$19,095,807, or US$637 per square foot, in Beijing, and US$19,561,890, or US$652 per square foot, in Tokyo.

What makes Hong Kong less expensive than it seems?

First of all, the leasing costs for grade A office buildings in Hong Kong are actually lower than those in Tokyo and Beijing. Although Hong Kong has topped the global prime office occupancy cost table, prime office buildings refer to only a handful (3 to 5) of creme de la creme grade A offices, a.k.a. grade A1 office buildings, in Hong Kong.