Prices of Hong Kong skyscrapers have hit US$6,330 per square foot, making them the most expensive in the world, half as much again at Tokyo values in second place, says Knight Frank
The price of Hong Kong skyscrapers has gone sky-high, says a top agent.
Capital values of Hong Kong skyscrapers have hit US$6,330 per square foot, 50% higher than its nearest rival, Tokyo at US$4,180 per square foot, says Knight Frank.
As a result, Hong Kong skyscrapers are the most expensive commercial real estate in the world, according to the latest Skyscraper Index.
Hong Kong’s large lead in the index can be attributed to the restricted geographic area of the city which results in developers having to convert air into ‘land’ and build upwards.
Its volatile office rents mean that investors can reap potentially long-term high rewards and after a soft 2013, rents have recently started to rise again.
The ‘ego’ appeal of the upper floors, with the panoramic views, delivers higher rents compared to the wider market. In Hong Kong and London, upper floors in skyscrapers can command a 15- 20% premium over typical rents.
James Roberts, Head of Commercial Research at Knight Frank, says, “Skyscrapers are the Lamborghinis of the office world, as investors pay more to own these prestige and high-quality buildings.
“Upper floors in skyscrapers command higher rents compared to office space in low-rise buildings, due to the ego appeal of having an office that towers over competitors.
“Also, the panoramic views are a strong marketing tool, as a client can be taken into a meeting room offering an aeroplane perspective on the city below. Thus, the premium rents on offer justify the high prices investors will pay to own such a property.”
Traditionally, financial and professional firms have been the main occupants of skyscrapers, although recent years have seen a wider range of firms taking high rise space.
In London and San Francisco, IT giant, Salesforce.com, has taken offices in landmark skyscrapers. In New York, the Empire State Building is popular with tech firms. Insurance firms are also moving to skyscrapers and London’s recent tower completions, 20 Fenchurch Street and The Leadenhall Building, are majority let to insurers.
The most notable jump in the index comes from San Francisco, which has sprung ahead of four Asian cities to fifth in the global league table, having been placed ninth in the spring. Rising prices are due to the rapid growth in California’s tech sector.
In Europe, London comes out on top, with capital values at more than double those in Paris or Frankfurt. London has moved up one place to fourth and the rise shows investor confidence in the future prospects of the UK capital’s office market, with its new wave of skyscrapers.
“Worth noting is recent evidence of hi-tech companies moving into skyscrapers. There are past examples of new industries during their ascendance phase choosing to take tower space for their offices, as an arriviste statement,” explains Mr Roberts.
“Examples include the 1931 Chrysler Building, during the inter-war boom for motoring, and the Pan Am Building in the 1960s, when air travel was first becoming a mass market. As the digital technology revolution continues, skyscrapers could offer a quick way of delivering large blocks of office space to keep pace with rapid headcount growth for such firms.
Among future skyscrapers are:
SHANGHAI TOWER, CHINA
The Shanghai Tower is being constructed beside the Jin Mao Tower and Shanghai World Financial Center in Pudong’s Lujiazui Financial District. At 121 storeys, with a total floor area of 4.4million square feet, this will be the second tallest building in the world and the tallest in China.
10 HUDSON YARDS, MANHATTAN, NEW YORK
The 52-storey, 1.7 million square foot tower is due to open in late 2015, and is 80% pre-leased to tenants Coach, SAP and L’Oreal. It lies on the west side of Manhattan, in an area that has primarily contained warehouses as well as the railyards serving Pennsylvania Station.
SALESFORCE TOWER, SAN FRANCISCO, CALIFORNIA
Scheduled for 2017 completion, this 61-storey, 1.4million square foot building is being developed in the SOMA district, which is popular with tech firms. Formerly known as the Transbay Tower, it has taken the name of its newly-signed anchor tenant, Salesforce.com, which has leased 714,000 square feet.
OASIS TOWER, MUMBAI, INDIA
The Oasis Tower will be 372 metres (1,220 feet) high, making it the second tallest building in India on completion in 2016. The scheme consists of 85 floors, of which 53 will house a hotel, office and retail space. The remaining floors will be apartments.
THE CITY TOWER, VAUXHALL, LONDON, UK
This 60-storey skyscraper will have 267 private apartments ranging from studios to penthouses, and 51 affordable homes at the base. There will also be a neighbouring 45-storey residential block, with a five star hotel and offices, with a linking walkway to The City Tower. The expected completion date is 2017.
100 BISHOPSGATE, LONDON, UK
100 Bishopsgate in the City of London will provide a 900,000 square feet of office, retail and restaurant space. The scheme consists of a five-storey podium, and 40-storey signature tower. It is set in London’s skyscraper cluster, and close to Liverpool Street station
By Adrian Bishop, Editor, OPP Connect