Manhattan, NY, was the market where renting an office was most expensive in the United States in 2023. The average annual quoted square footage rent of office space was close to ** U.S. dollars in the fourth quarter of the year. Only one other market - East Bay - came close to this rental rate. In Washington D.C., the market with the second-largest inventory of class A downtown offices, the annual rent amounted to approximately ** U.S. dollars per square foot. Since the onset of the coronavirus pandemic, the office real estate sector has been suffering an increase in office vacancies, affecting both downtown and suburban properties.

The average asking rent for Class A office space in Midtown Manhattan was ***** U.S. dollars per square foot in the first quarter of 2024. It was above the Manhattan average of ***** U.S. dollars, but below that of Midtown South, which was the most expensive district at ****** U.S. dollars per square foot. What is Class A real estate?Class A real estate refers to the best properties in terms of appearance, age, quality of infrastructure and location. These properties usually command the highest rental rates, due to their high quality. In the U.S., Manhattan has the most expensive rents for Class A offices.Midtown vs Midtown SouthMidtown Manhattan contains the Empire State Building, MoMA, Grand Central Station, and the United Nations Headquarters. The most expensive submarket there was Plaza District in 2024. Meanwhile, Midtown South is home to Madison Square Garden, Pennsylvania Station, Hudson Yards, and Koreatown. In 2024, the most expensive submarket there was Hudson Yards, followed by Chelsea and Hudson Square.

In the third quarter of 2024, London (West End) was the market with the most expensive prime office space worldwide. The net effective cost for a prime office in London cost close to *** U.S. dollars annually. In second and third market in the ranking, Hong Kong and Midtown New York, prices also exceeded *** U.S. dollars per square foot. The global office real estate sector was severely affected by the coronavirus pandemic and the political and economic uncertainty that followed. With many companies placing expansion plans on hold and transitioning to hybrid working models, vacancies across many markets spiked and leasing activity slowed down.

Rents for industrial real estate in the U.S. have increased since 2017, with flexible/service space reaching the highest price per square foot in 2024. In just a year, the cost of, flex/service space rose by nearly *****U.S. dollars per square foot. Manufacturing facilities, warehouses, and distribution centers had lower rents and experienced milder growth. Los Angeles, Orange County, and Inland Empire, California, are some of the most expensive markets in the country. Office real estate is pricier Industrial real estate is far from being the most expensive commercial property type. For instance, average rental rates in major U.S. metros for office space are much higher than those for industrial space. This is most likely because office units are generally located in urban areas where there is limited space and thus higher demand, whereas industrial units are more suited to the outskirts of such urban areas. Industrial units, such as warehouses or factories, require much more space because they need to house large, heavy equipment or serve as a storage unit for future shipments. Big-box distribution space is gaining in importance Warehouses and distribution may currently command the lowest average rent per square foot among industrial space types, but the growing popularity of the asset class has earned it considerable gains over the past years. In 2021 and 2022, high occupier demand and insufficient supply led to soaring taking rent of big-box buildings. During that time, the vacancy rate of distribution centers fell below ****percent. The development of industrial and logistics facilities has accelerated since then, with the new supply coming to market, causing the vacancy rate to increase and the pressures on rent to ease.

In Texas, Austin was the most expensive market for office space in the second quarter of 2024. The rental rate of class A offices was nearly 52 U.S. dollars per square foot, compared to 26 U.S. dollars per square foot for El Paso. Dallas, which is the largest office real estate market in the state, had rental rates of about 30.3 U.S. dollars for all classes and 35.7 U.S. dollars for class A offices. In the United States, Manhattan, San Francisco, and Silicon Valley-South Bay fetch the highest office rental rates.

During the second quarter of 2024, Bogotá had the highest average monthly rent for offices among the major cities in Colombia. The average monthly rent in Bogotá was approximately ****** Colombian pesos per square meter. In Cali, the average rent of offices reached ****** Colombian pesos per square meter, a rise of over three percent from the second quarter of 2023. On the other hand, Barranquilla offered the most affordable offices, at slightly above ****** Colombian pesos per square meter.

In 2023, Frankfurt and Munich were the German cities with the highest prime rents for office real estate, but Berlin had the highest average rent. In Munich, the prime office rent amounted to 48 euros per square meter, while the average rent was twice lower, at 23.85 euros per square meter. Prime rents refer to the top price segment in the market, usually buildings in the most desired locations and of the highest specifications.

Downtown offices in the United States achieved on average higher rents than suburban offices. In the fourth quarter of 2023, the annual quoted rent of Class A offices in downtown areas was **** U.S. dollars per square foot, while for suburban offices it was ** U.S. dollars per square foot. Despite a slight dip in 2021, office rents have overall increased from the historical average. Until 2027, office rents are forecast to grow slightly.

Rental rates in the United States increased steadily since 2008. In 2023, the producer price index for gross rent in office buildings reached ***** index points. This means that between 2008 when the index value was set to 100 and 2023, gross office rents grew by about ** percent. Manhattan, San Francisco, and Boston are among the biggest and most expensive markets for office space in the United States.

In the fourth quarter of 2024, the average monthly rent for grade A office space in Hong Kong's Central district amounted to *** Hong Kong dollars per square meter. Central had the most expensive office real estate among all districts in the city. Compared to other major cities in the Asia-Pacific region, Hong Kong had the highest average rent for grade A office real estate.

The Back Bay district was the most expensive real estate market for office space in Boston in the third quarter of 2024. On average, the average asking rent was about ** U.S. dollars per square foot of office space. Downtown Boston, the market with the largest inventory of office space among Boston districts, had the second highest rent, at about ** U.S. dollars. The gross rental rate usually includes costs for utilities and other general maintenance expenses.

The rental prices of prime office spaces per square meter varied greatly across different European cities in 2023, ranging from over ***** euros in London to *** euros in Riga. Prime office properties typically meet specific criteria, including a good location in major commercial centers, public transport accessibility, and energy efficiency. Where in Europe are offices most expensive? London, England, had the most expensive prime office spaces with the West End, Marylebone, and Knightsbridge/Chelsea submarkets commanding the highest prices. Other European cities with high-end office rents included Paris, Milan, and Dublin. Where is the most office space leased? Larger cities with flourishing economies tend to attract most businesses despite higher office space costs. Therefore, it is unsurprising that Germany's big Four (Berlin, Munich, Frankfurt, and Hamburg), Paris, and London had the highest take-up rates for office spaces across Europe. In Berlin and Luxembourg, the share of vacant office space was less than **** percent.

Washington DC was the most expensive major city for office space, among those being considered for Amazon’s second headquarters, in the United States in 2017. Tenants paid, on average, 595 U.S. dollars per square foot for office space in that city, compared with 550 U.S. dollars and 486 U.S. dollars per square foot in Boston and Austin respectively.   Why is Washington DC so expensive? The GDP of the Washington metro area has steadily risen since 2001, which indicates that the economy is growing. This is not surprising, because it is the capital of the United States and, consequently, its political epicenter. All three branches of government, nearly 200 foreign embassies and several international organizations - such as the IMF, the World Bank and the National Geographic Society - are located there, which also means that it’s the logical place for lobbying firms and many financial services companies to operate from.

Further growth expected in Washington DC The future of the office real estate market in Washington DC looks promising, due to its political importance and strong economy. Office rents are forecast to grow by almost six percent by 2021, which is impressive given how high they already are. However, vacancy rates are also set to rise in the area, which means that more available office units will be unoccupied.

In 2024, the net asking rent for office space in Downtown Toronto amounted to **** Canadian dollars per square foot. The most expensive submarket in the city was the Financial Core - a location concentrating a major share of the office inventory, with a rapidly developing new stock.Toronto’s office market Toronto is the capital of Ontario and a global financial center. Ontario generates a large portion of Canada’s GDP, which means that office real estate is vital for the region. Downtown Toronto had significantly more office space inventory than Midtown Toronto, and also a lower vacancy rate. Comparison with other leading cities Offices in Toronto have a higher vacancy rate than the national average. Overall, vacancy rates were the lowest in Vancouver and Montreal.

In the first half of 2023, Mumbai remained to be the most expensive city for rental office space in India, at a monthly rate of *** Indian rupees per square feet. In the city of Hyderabad, the costs for office space rent remained stable at a much lower price than in Mumbai.

In 2024, Venice was the most expensive city to buy office space in Italy: the average price was 3,791 euros per square meter. According to the ranking, the second most expensive city was Milan, followed by Rome, and Naples. Overall, cities in southern Italy offered lower prices: office space in Catania, for example, cost on average 1,345 euros per square meter. Retail space more expensive than office space According to the same report, published by the Italian Revenue Agency (Agenzia delle Entrate), retail spaces are more expensive than office spaces. For example, one square meter for retail use in Venice cost as much as 4,779 euros in 2024, approximately 1000 euros more than office spaces. In Milan the gap was also similar to the one in Venice. Retailers there could expect to pay on average approximately 4,258 euros per square meter, around 600 euros more than the price asked for office spaces. Milan and Rome are prime locations Due to their population size and their role as the leading economic centers, Milan and Rome are the most well-off cities in the country. Thus, it should not come as a surprise that both cities boast the highest prices in all segments of the real estate market. In 2022, a new dwelling in Milan cost on average 4,214 euros per square meter; one in Rome approximately 3,359 euros per square meter.

The average asking rent for office space in Midtown Manhattan in the fourth quarter of 2023 was highest in the Plaza District. The square foot of space cost 93.3 U.S. dollars to rent in that quarter. The cheapest submarket to rent office space was Columbus Circle, where a square foot cost 68.32 U.S. dollars. Times Square was the only district where the average rent rose between the fourth quarter of 2022 and the fourth quarter of 2023.

In the second quarter of 2021, the monthly rent for office space in Beijing amounted to almost *** yuan per square meter. It was the highest rent among all cities in mainland China. There is a large disparity between real estate in tier-1 cities and the rest of China. Not only is rent significantly lower, but in some lower-tier cities, the vacancy rate is higher.

Warsaw was the largest city in terms of leased office space in Poland in 2024 and the most expensive. Monthly rent ranges from **** to **** euros per square meter. The cheapest office space rent was recorded in ***************.

San Francisco's office rental market showcases significant variation across its submarkets, with Mission Bay commanding the highest rates at *** U.S. dollars per square foot in the third quarter of 2024. This premium location demanded nearly double the city's average rate, highlighting the stark differences in desirability and demand within the city's commercial real estate landscape. Economic powerhouse The San Francisco Bay Area's economic prowess is evident in its impressive economic growth over the past 20 years. The city's strength is fueled by the presence of major technology companies and a thriving startup ecosystem. The region's economic significance extends beyond local boundaries, contributing substantially to California's position as the state with the highest GDP in the country. This economic vitality helps explain the sustained demand for office space across various San Francisco submarkets. Offices: global context and market trends In a global context, San Francisco's office rental rates are relatively high but not the most expensive worldwide. In 2024, London, Hong Kong, and New York emerged as the top three most expensive office rental markets globally. Over the past five years, San Francisco has experienced a decline in office rents. This trend aligns with broader shifts in the office real estate sector, influenced by the COVID-19 pandemic and the rise of hybrid work. Despite these challenges, certain San Francisco submarkets like Mission Bay and The Presidio continue to command premium rates, reflecting their enduring appeal to commercial tenants.