Hong Kong entered 2011 as the most expensive office location in the world

Occupancy costs per workstation in Hong Kong's prime district of Central and Admiralty surged by 31% year-on-year in 2010.

According to DTZ, this pushed Hong Kong up from second in 2010 to first in 2011, ahead of London's West End, Geneva, Tokyo and Zurich. The increase in Hong Kong was driven by a surge in prime rents on the back of healthy demand and a shortage of space.

David Green-Morgan, Head of Asia Pacific Research at DTZ comments: “Hong Kong is traditionally a volatile and cyclical market, responding very quickly to economic highs and lows. This is reflected in the fact that the prime rent took only one year to recover its ground in the wake of the financial crisis. We forecast that Hong Kong will continue to outpace other markets in the region, with the gap between it and other centres widening as occupancy costs increase by USD 9,190 to reach USD 31,520 by 2015. This will be driven by rental growth on the back of strong occupier demand and tight availability.”

DTZ’s report also compares the cost of occupying prime and secondary space in select markets. Hong Kong is the most expensive location in the world for occupying secondary space, as well as prime. The biggest difference in the cost of occupying prime and secondary space in Asia Pacific is seen in Shanghai (Jingan), where occupying prime space costs 80% more than taking space in an average grade building.

Adam Catchpole, Head of DTZ Occupier Services for Asia Pacific said: “Occupiers are responding to rising occupancy costs in the prime Hong Kong Central and Admiralty market by considering other Hong Kong sub markets, including Kowloon and Island East, and thinking about which parts of their business need to be occupying prime space. Occupiers are also focusing on using prime space more efficiently, for example through the use of flexible working and shared services.”