London Named Most Expensive Office Market As Highest Reported Rents Top $265 PER SF

New York City, San Francisco, Boston Top List of Highest-Priced U.S. Office Markets

NAI Global 2008 Global Market Report Provides Data On 200+ Commercial Property Markets Worldwide


Fueled by hedge funds driving up rental rates in prestigious West End developments, London pushed past Hong Kong to claim home to the highest-priced office space in the world. Rental rates in the Mayfair submarket in London’s West End reached $265.31 per square foot per annum in 2007, according to NAI Global’s 2008 Global Market Report. Rents there increased over $40 per square foot during the past year.

Hong Kong had held the title for several years, and was a strong contender to in 2007 with top rents of $263.20 per square foot. Hong Kong’s Class A rents climbed approximately 25-30% market-wide, reflecting robust market conditions.

New York City also narrowed the gap with peak rents of $225 reported for the most expensive space in Midtown Manhattan. With a Class A vacancy rate of just 5.2% in Midtown, $100+ deals are now commonplace in Class A buildings.

“Image-conscious investment managers are driving up rental rates in Mayfair, where peak rents are almost double the highest office rents in any other part of the city,” stated NAI Global President & CEO Jeffrey M. Finn. “Hong Kong tenants have had to contend with sky-high rental rates for several years now, but in London, New York City, San Francisco, Moscow and a few other major cities, the increases registered in 2007 pose a real challenge for companies with expiring leases that were originally signed in much more favorable market conditions.”

The most expensive office markets share a number of key characteristics, including strong local/national economies and significant supply constraints, Finn noted. For example, with over 510 million square feet of Rentable Building Area (RBA), New York City is the largest market in the United States, but has a market-wide vacancy rate of just 5.3%. Availability of premium quality space in the most desirable submarkets is almost nonexistent. New York’s peak rents, found in Midtown Manhattan, are more than double the highest rents reported in any other U.S. Market.

Midtown was followed by San Francisco with peak rents of $110 per square foot downtown, and Boston, with top rents of $90 per square foot in the Financial District.

San Mateo, California, topped the list of highest-priced suburban office markets in the U.S. with peak rents of $156 per square foot per year, nearly four times the effective average rents for Class A space in the market. San Mateo County is home to San Francisco International Airport and some of the world’s leading technology companies. Santa Clara County, aka Silicon Valley, was second with top-end rents of $81 per square foot, follow by Los Angeles at $75 per square foot. Overall, California markets claimed seven of the 10 priciest suburban markets in the U.S. Northern New Jersey, at $53.80, Northern Virginia, at $48, and Miami, at $47.50, also made the list.

NAI Global is one of the world’s largest commercial real estate services providers. Headquartered in Princeton, New Jersey, NAI Global manages a network of 8,000 professionals and 375 offices in 55 countries. Now in its 22nd year, NAI’s Global Market Report offers insider insight and perspective on market conditions reported by NAI experts on the ground in over 200 property markets worldwide.

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