Rents for skyscraper offices in Australian cities are rising faster than those in any other global location, according to the latest index covering commercial building over 30 storeys high.
But Hong Kong has the most expensive skyscrapers with an average rent of US$302.67 per square foot, followed by Manhattan in New York at $159, Tokyo at $134.39, San Francisco at $113 and London at $104.56.
But these top five most expensive rental locations have not seen much growth in the second half of 2016, up by 0.6%, 0.6%, 1.1% respectively and then the last two unchanged, according to Knight Frank’s latest skyscraper index.
It is Melbourne and Sydney that have seen rents grow the fastest with an increase of 11% and 10.1% respectively in the second half of last year to $50.89 and $97.34, still some considerable way for the top cities.
Some cities have seen rents fall including Seoul with a drop of 4.8% to $29.93 per square foot, Singapore down 4.2% to $63.64, Shanghai down 2% to $67.81 and Beijing down 1.3% to $59.84. The report suggests that this highlights heightened economic uncertainty and a cautious business outlook.
The index report says that in Sydney, stock withdrawals to accommodate the new Metro line and residential conversions are reducing the overall supply, while Melbourne had the strongest level of net absorption in 2016.
Dan Gaunt, head of Knight Frank’s City Agency, pointed out, however, that despite uncertainty following the decision of the UK to leave the European Union, rents in London’s skyscrapers remain significantly higher than those in other major European cities.
He added that demand for space in the UK capital’s landmark tall buildings shows little sign of diminishing and he predicts that rents are likely to remain at their current level through 2017.
‘The strong performance for Melbourne and Sydney reflect local market factors. If we set those cities to one side, the general picture from the latest skyscraper index is flat growth, which reflects the nervousness in most office markets in the second half of last year over political risks, like Brexit and the US election,’ said James Roberts, Knight Frank chief economist.
‘However, in 2017 the tone of global economic news is improving, and both Brexit and the Trump Government have not had the negative impact on growth that was initially feared. When we compile the next skyscraper index in the summer, I expect to see more cities reporting rental growth in tower buildings,’ he added.