Strong occupier demand despite sub-prime crisis

Media release
11 January 2008

Strong occupier demand despite sub-prime crisis

International property adviser, DTZ, released its annual Global Office Occupancy Costs survey this week with results pointing towards strong occupier demand across all key global regions despite fallout from the United States sub-prime crisis.

London’s West End continues its hold as the most expensive location globally with Hong Kong following in second position and London City in third. Singapore skyrocketed up the world rankings, from 55th place to 13th in the past year, highlighting the sustained strong demand for prime office space in the Asia Pacific region.

Auckland was New Zealand’s most expensive city in 68th place, jumping five places from last year with a total office occupancy cost of NZD$9755 per workstation per annum. Wellington jumped nine places to rank 91st with an occupancy cost of NZD$7,632 per workstation per annum and Christchurch dropped four places to 122 with an occupancy cost of NZD$5,276 per work station per annum.

Auckland’s position in the survey ranking places it ahead of other large metropolitan cities such as Los Angeles, Montreal and Canberra.

DTZ National Director of Research, Ian Mitchell, indicates that while the office market enjoyed a buoyant year in 2007 the shortage of space, particularly in Auckland, will force employers to use space more intensively or seek lower-cost alternatives outside the central business district.

Across the Tasman, Sydney was the seventh most expensive city in the Asia Pacific region and the highest ranked Australian location at 44 on the global list. Brisbane placed at 50, dropping ten places from 2007 and Melbourne remained steady on 98.

The office occupancy survey also paints a reasonable outlook for the year ahead. Ian Mitchell says the survey outlines the expectation that occupier market fundamentals will remain healthy although some probability of weakening demand remains if the economy slows and affects jobs growth in core sectors.

Globally, 77% of the 137 locations surveyed expect occupancy costs to increase in 2008 while a further 22% of the locations expect occupancy costs to stabilise, reflecting the generally positive economic prospect.

The ten most expensive office locations by occupancy costs in the DTZ survey are*:
1. London (West End) NZD$38,233 (USD$31,160) 34.0% year-on-year increase
2. Hong Kong NZD$33,791 (USD$27,540) 27.0% year-on-year increase
3. London (City) NZD$25,387 (USD$20,690) 17.0% year-on-year increase
4. Paris NZD$25,067 (USD$20,430) 15.0% year-on-year increase
5. Tokyo (Central 5 Wards) NZD$22,614 (USD$18,430) 15.5% year-on-year increase
6. Dublin NZD$22,245 (USD$18,130) 14.7% year-on-year increase
7. New York (Midtown) NZD$20,871 (USD$17,010) 3.7% year-on-year increase
8. Palo Alto, California NZD$20,699 (USD$16,870) 50.0% year-on-year increase
9. Frankfurt NZD$20,652 (USD$16,830) 25.5% year-on-year increase
10. Oslo NZD$20,540 (USD$16,740) 56.7% year-on-year increase

68. Auckland NZD$9,755 (USD$7,950) 30.5% year-on-year increase
91. Wellington NZD$7,632 (USD$6,220) 27.5% year-on-year increase
122. Christchurch NZD$5,276 (USD$4,300) 20.4% year-on-year increase

*Figures are per workstation per annum. Additional details can be found in the attached report.

Note:
Occupancy costs are defined as the average total cost of leasing prime net usable space. This is defined as modern, well-specified office space of 10,000 sf (929sm) within a prime central business district location. They include rent and outgoings, such as maintenance costs and property tax, if these are normally payable by the occupier but exclude rent-free periods, fitting-out costs and other leasing incentives.

ENDS

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