What’s driving China’s high office rents?

Of the top 10 most expensive places to rent an office across the world, Chinese cities make up half. And, at US$323 per square foot, Hong Kong’s Central district takes the crown as the world’s priciest office rent location for the second year running.

In fourth place – after New York’s Midtown and London’s West End – is Beijing’s Finance Street, according to JLL’s Premium Office Rent Tracker. Beijing’s CBD, Shenzhen, and Shanghai’s Pudong come in at seventh, eighth and tenth place, respectively, highlighting the dominance of Chinese cities.

China’s strong market fundamentals, increasing costs and ongoing demand for premium office space explain the country’s dominance in the top 10, says Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services, JLL Asia Pacific.

He adds that the demand for office space in China is being driven by domestic companies – across all sectors from finance to technology. “Established Chinese firms continue to extend their national footprint, and will continue to drive even more demand for office space particularly in Shanghai and Beijing.”

Techy demand
It’s the demand from tech firms that has catapulted Shenzhen into the Premium Office Rent Tracker for the first time – with the Futian district commanding the highest office rent.

In fact, Shenzhen has been heralded as China’s Silicon Valley and is home to domestic tech giants such as Huawei and Tencent Holdings as well as other key tech firms like BGI Genomics, drone-maker DJI and real estate listing site Fangdd.com

Chinese cities aside, Delhi and Tokyo-Marunouchi are also among the top 10 priciest office locations globally. And, according to Sheldon, it’s these firms that we will see increasingly move into premium locations as part of their strategy to attract the best talent.

“While cost is a key consideration, companies are now prioritising locations with access to talent. We continue to see a greater number of companies from the technology sector targeting premium buildings in a bid to enhance their brand image,” he says, adding that a significant number of tech occupiers are upgrading their premises from serviced to proper offices, and from Grade B to Grade A space.