The Real Deal New York

No surprise here: Midtown’s office space is among the costliest around the world

New JLL report ranks global cities’ annual office occupancy costs
By Mary Diduch | December 14, 2018 06:00PM

From top: New York, Hong Kong and London

It’s almost no surprise — the cost to take office space in Midtown ranks among the highest in the world.

To be exact, it costs $212 per square foot per year to occupy space in the Midtown submarket, according to a new third-quarter global office report from JLL. The firm used net effective rents and additional costs to figure out which office markets were the costliest.

Midtown’s office market was just second only to Central Hong Kong, where it costs $338 per square foot annually, but it edged out London’s West End market by an extra $17 per square foot per year.

Rounding out the top five most expensive office markets around the world was Midtown South at $182 per square foot.

Midtown generally ranks in the top two globally, but Midtown South has seen rent appreciation that has caused the submarket to join the top of JLL’s ranking, said Craig Leibowitz, a director in the firm’s New York research department. The rent growth stems from a supply-demand imbalance, where the vacancy rate in the third quarter was 5.3 percent, he said.

The submarket has seen 11 straight quarters of positive rent growth, according to JLL’s third-quarter New York office report. The average asking rent that quarter was $83.57 per square foot.

“It’s the tightest CBD in the country and also the highest priced,” Leibowitz said.

In Midtown, the vacancy rate was 7.3 percent in the third quarter. However, the picture changes around the city.

JLL found that the office occupancy cost in the Downtown submarket, for example, comes in at $107 per square foot per year — quite a discount compared to the Midtown submarkets.

Downtown also saw its vacancy rate bump up 100 basis points year over year to 11 percent in the third quarter, according to JLL’s third-quarter report. But that’s largely because of the delivery of Three World Trade Center and 1 million square feet of vacancy at One World Trade Center, the report stated.