NY skyscraper rents surge as HK leads world

Office rents on the highest floors of skyscrapers in New York climbed 20 percent in the second half of last year, while Hong Kong comfortably kept its place as the most expensive place in the world to lease.
New York rents rose 20 percent to USD150 in the period, the second-biggest increase after Kuala Lumpur, according to an 18-city index compiled by London-based Knight Frank LLP. Offices near the top of Hong Kong skyscrapers cost $251 a square foot, 66 percent more than in New York.
The number of skyscrapers worldwide that are more than 1,000 feet high has jumped to 79 from 19 since 2009, with 40 percent of them in China, according to Knight Frank. Companies are willing to pay a premium to lease workspace in towers because it helps them retain staff, while investors such as sovereign wealth funds want to buy the properties because it allows them to spend $1 billion or more on a single asset, said James Roberts, the firm’s head of commercial research.
“Hong Kong had pretty punchy rental growth in the second half,” said Roberts. “It’s a very successful, fast-growing city that happens to be in a geographically constrained area. You hit the barriers and then prices can only be driven up.”
New York rental costs have soared along with skyscraper development, with digital and creative firms opting to rent space. Occupiers in the city are willing to pay about double the normal rental rate for upper floors of towers, according to Knight Frank. That compares with 20 percent or less in the City of London financial district and in Hong Kong.
Tokyo has the third highest skyscraper rents, London is fourth and San Francisco ranks fifth, the report says.
Chinese financial firms are underpinning Hong Kong’s office rents as the city connected its stock exchange with Shanghai in November and is expected to link its bourse with Shenzhen’s later this year.
Prime office space leased by financial companies based in China was 148,000 square feet last year, a 51 percent jump from 2013, according to data from realtor CBRE Group Inc.
Though Hong Kong is commanding the highest rents, other international cities such as New York and London are eroding that lead, Roberts said.
“Economic growth prospects for this year favor locations like New York and London,” he said. “Many people like to say that the balance in the global economy is shifting from west to east, but certainly skyscraper rents provide another indicator that shows this is not entirely the case.” Neil Callanan, Bloomberg