Office Asking Rents on the Rise in World’s Major Office Markets

New York—For the first time this decade, asking rents for Class A office space increased simultaneously in 10 major global markets, according to preliminary year-end 2005 figures from CB Richard Ellis Research. Hong Kong and Tokyo were among the strongest office markets in the world, with significant increases in asking rent and declining vacancies.

Hong Kong (left). Tokyo (above).

“Global investment activity has been strong during the past few years, but rising asking rents and falling vacancies indicate that the fundamentals are catching up,” said CBRE Research’s Steven Dunn. “Strong demand for office space, modest construction activity and continued capital flow should fuel continued growth in the investment market.”

The North American real estate market also had a strong 2005, particularly in New York, where a rebounding economy helped produce an 11.8 percent increase in asking rents from a year ago to $44.85 per sq.ft. Despite the addition of several new buildings to the city’s skyline, the vacancy rate decreased from 8 percent a year ago to 7 percent. Los Angeles, a city whose downtown office market has been stagnant for several years, rebounded in 2005 with increasing asking rents and falling vacancy. Asking rents increased 15.3 percent to $29.76 per sq. ft., while the vacancy rate fell 1.5 percentage points to 13.1 percent.

Washington, D.C., was one of the only major markets to see a spike in construction activity, fueled by low vacancy rates and a growing Federal government. Despite 2.9 million sq. ft. of new construction completed in 2005, asking rents have increased 4.5 percent from 2004 to $45.47 per sq. ft., while the area’s vacancy rate has dropped from 6.8 percent to 6.4 percent. In Canada, asking rents in Toronto were up 3.9 percent from 2004 to $25.44 per sq. ft. The city’s already low vacancy rate dropped 2.1 percentage points to finish the year at 6.3 percent.

Below is a list of the 10 markets surveyed by CBRE Research. They were selected based on the fact that they are among the largest and most active office markets in the world.