London beats Hong Kong as most expensive city for office space
A general view across London from the Golden Gallery at St Paul’s Cathedral. London recently surpassed Hong Kong as the city with the most expensive office space.
London overtook Hong Kong in 2012 to win the dubious accolade of world's most expensive city for office space, according to a survey of 126 major cities by property agency DTZ.
DTZ found, on average, companies paid $23,500 per worker in 2012 to locate in prime office space in the West End, an area to the west of the historic City of London. This put London ahead of Hong Kong, which was 2011's most expensive office location.
While average costs per head in London remained stable compared with the previous year, the cost of occupancy in central Hong Kong fell 11 percent to $22,190 from $25,160 in 2011.
DTZ cited drops in rental rates for the decline in Hong Kong, with firms seeking to reduce operating costs by downsizing or moving out of the heart of the city.
Karine Woodford, DTZ head of occupier research, recommended that firms looking for a cost-efficient base in Asia search outside of Hong Kong.
"There will be opportunities in the next two years for occupiers seeking to establish Asian operations in Kuala Lumpur and Singapore, where we anticipate costs will fall by 1.3 percent and 0.7 percent, respectively," said Woodford in the survey.
"However, it should be noted that vacancy rates in Singapore are currently at their lowest level since 2008, and we expect costs to rise steadily over the longer term."
Six other European cities made it to the top 10 list of most expensive business districts, including Geneva, Zurich, Paris, Oslo and Moscow. The City of London came in at No. 9, with an average cost per head of $14,620.
(View More: World's Most Expensive Real Estate Markets)
Globally, office costs rose by an average of just one percent during 2012, below world inflation of 3.2 percent.
However, costs in London may have been boosted by a change to stamp duty in the March 2012 budget, which increased the tax on properties purchased for over two million pounds ($3.2 million) from five to seven percent.
(Read More: Offshore Owners Face Steep New Tax in London)
"This was inevitably a tax on London, given 77 percent of properties over two million pounds are located here," said estate agency London Central Portfolio in a press release.
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