Hong Kong's Central is the most expensive office market in the world, with occupancy costs, which includes rent, service charges and government taxes, 60 percent higher than New York's Midtown, and nearly 75 percent more than London's West End.
While Hong Kong's Central area will set you back in occupancy costs of US$338 per square foot, in Taipei premium offices is 80 percent lower, according to JLL data. Or Seoul, where office costs are around 70 percent lower.
Given the price difference, "International companies are looking beyond the core office markets, such as Hong Kong, into emerging office markets of Asia Pacific for expansion or in some cases consolidation, which may help counter-balance the current high occupancy costs," says Jeremy Sheldon, Head of Markets, Asia Pacific, JLL.
Yum! and Citibank have signed leases in Bangkok, co-working firms WeWork has signed a new deal in Jakarta and JLL has opened a new office in Bangalore.
Of course, cheaper doesn't mean better. Workplaces play a big part in talent attraction and retention, so excellent transport, trendy local amenities, and the quality of connectivity to the digital world are still important.
The most affordable premium office markets in Asia Pacific premium office markets balance those needs without breaking the bank, according to JLL's Premium Office Rent Tracker.
Ho Chi Minh City is a Southeast Asian hot spot for start-ups due to its solid entrepreneur community, limited overhead costs and young, fast-paced workforce. Technology companies have contributed significantly to leasing demand in the market with several companies taking up more than 1,000 sqm. The city's Grade A office stock is not expected to grow for at least the next two years. But, upcoming high-quality Grade B office buildings are expected to ease the growth momentum of Grade A rents.
DEUTSCHES HAUS BUILDING - An office building in District 1 Ho Chi Minh City. (Source: saigonoffice.com.vn)
Vietnam's office market is not only affordable but also offers the best office yield rate. Evaluating the investment prospects of cities in Vietnam, Ms. Hoang Nguyet Minh, investment manager of Savills Hanoi said: “High yield rate indicates an interesting correlation level between profit from premise leasing and capitalized value of office building. So the fact that Hanoi and Ho Chi Minh City are having the world’s highest yield shows very positive prospects of office rental rate as well as leasing capacity in the two markets”.
The past 5 years have witnessed quite a flourishing operation situation for Ho Chi Minh City with average rent increasing 8% year-on-year and the leasing capacity reaching 97%. Meanwhile, the increasing level of rental rate in Hanoi was 3% yearly in the fourth quarter of 2018 with a stable leasing capacity of 95%. Grade A office segment in non-central area has also had an improved operation situation.
“It is understandable when these two markets have been captivating attentions of foreign investors, especially those from Singapore, Japan and Korea. The number of transactions made in 2018 was very limited despite high demands. This is due to the restrictions on the number of projects for sale”, Ms. Hoang Nguyet Minh shared.
