OfficeSurvey: Hong Kong is the biggest riser in a ranking of the world's most expensive locations for office space, climbing 12 places to take the number five slot

Hong Kong is the biggest riser in a ranking of the world's most expensive locations for office space, climbing 12 places to take the number five slot, according to this year's edition of Business Space Across the World (BSATW) by Cushman & Wakefield Healey & Baker (C&W/H&B), Lisney's international associates.

The cost of occupying one square metre of prime office space in the central district of Hong Kong reached the equivalent of €637 a year.

Hong Kong's improved position is as a result of rents rocketing 109 per cent in local currency terms last year - rents are the biggest part of occupancy costs.

Michael Thompson, Cushman & Wakefield's chief executive officer in Asia Pacific, comments: "Banks and other financial institutions have been particularly active in the Hong Kong market, taking the opportunity of historically low rents to upgrade to better-quality office space. But we must remember that Hong Kong is traditionally a volatile market, and rents are still 42 per cent below their 1997 peak. For 2005, we forecast that rental prices will continue to grow, but at a slower rate."

In the ranking, London retains its number one position, with Paris in second place. The cost of occupying one square metre of office space in London's Mayfair district is €1,571 a year, compared with €945 in Paris' central business district, the eighth arrondissement - a gap of 66 percentage points, which puts London well into the lead.

The 2005 edition of Business Space Across the World ranks the most expensive locations for occupying office space in 47 of the world's leading countries.

In the year to December 2004, office rents increased or were stable in local currency terms in two-thirds of the 210 locations monitored, compared with last year's 50 per cent.

"The report shows that the revival of the world's economies is finally filtering through to the top-end of the office real estate sector, with increased demand for modern space in the right location driving up occupancy costs," says Peter Stapleton, managing director, Lisney. "Further evidence is also emerging of a 'dual' market, as secondary properties, which don't match the needs of the modern office occupier, look set to remain in oversupply for some time."

New York's Midtown district in Manhattan retains its position at number four. Office rents have risen year-on-year and, with vacancy rates approaching 10 per cent in 2005, the Midtown market is expected to perform even better this year, driven by the banking and financial sectors.

About the overall affect of business sentiment on office occupancy decisions, Peter Stapleton comments: "The view out there is one of 'optimistic' caution. The business confidence shown by the financial sectors and certain professional services is yet to be mirrored to the same extent by multinational corporates; a sense of uncertainty still pervades - whether over the price of oil, the weakness of the US dollar or a stalling in export demand."