In part two of our blog post series following on from Patty Vozzo’s Global Workspace Association presentation, we’re taking a look at average desk rates around the world. Patty is Instant’s US Corporate Solutions Director, and her presentation was entitled “The Macro View: The Future Began Yesterday”. The presentation focussed on the difference in rental rates across the globe and the growth of the serviced office (also referred to as ‘executive suite’) market between 2011 and 2013.
The Statistics
We can see significant differences in average desk rates across the globe:
- Paris: $1490 / £920
- Tokyo: $1324 / £820
- Hong Kong: $1147 / £710
- Singapore: $1122 / £695
- Beijing: $1090 / £675
- London: $956 / £592
- Sydney: $875 / £542
- Shanghai: $722 / £447
- Madrid: $675 / £418
- Berlin: $620 / £384
*data from July 2013
What factors affect the desk rates?
Desk rates are constantly changing, and are determined by a number of factors. List prices are generally set based on the location and characteristics of the individual offices within the centre. For example, corner window offices have a higher desk rate than interior offices and offices with better views or proximity to centre facilities may also be priced higher. Of course, generally availability within the business centre will also have an impact too; newly opened centres sometimes offer fantastic introductory rates. Further, the length of lease a tenant is willing to commit to can sometimes affect the agreed rent too.
Why do the rates differ between cities?
Commercial property rent levels and costs for running and maintaining facilities vary from market to market, and this has a large impact on desk rates. For example, property prices in Paris are much higher than they are in Berlin. Central Paris is very dense and comprised of many older period buildings. These in turn cost more to rent, fit out and maintain then a newer office building in a lower priced market such as Berlin.
Supply and demand for serviced office space also has a lot to do with average desk costs; markets with very little supply and high demand have much higher rates than others where the demand is less.
Expert insight
Instant’s Head of Portfolio Services, Branton Moore, provided his take on desk rates and market fluctuations:
“The rents paid by the serviced office providers certainly have an effect on the prices they must pass on to their clients, but changes in serviced office rates do not always mirror the overall property market. During the recent global financial downturn, many serviced office providers used this as an opportunity to sign long term leases on space when the property market was low. This created an abundance of additional supply of serviced office space in the market that needed to be filled. Supply increased much faster than demand, so rates were lower. Centres were also eager to fill their new centres, so attractive introductory rates were also offered.
Even when the overall property market rebounded and rents increased, serviced offices were still able to offer very attractive deals. For example, overall serviced office in Hong Kong had a lower cost per desk than compared to fully inclusive costs for self-delivery of leased premises. With an increase in demand, this gap is narrowing, but there are still fantastic deals to be had in the Hong Kong serviced office market.”
If you’re looking to acquire new business premises, Instant will provide advice on changing market conditions to help you take advantage of the best rates. Please get in touch to find out more!
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