The average asking rent for Class A office space in Midtown Manhattan was 82.74 U.S. dollars per square foot in the first quarter of 2024. It was above the Manhattan average of 80.38 U.S. dollars, but below that of Midtown South, which was the most expensive district at 103.42 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.

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 69 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 68 U.S. dollars. The gross rental rate usually includes costs for utilities and other general maintenance expenses.

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 five 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 six 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.

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 80 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 59 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.

Rental rates in the United States increased steadily since 2008. In 2023, the producer price index for gross rent in office buildings reached 132.9 index points. This means that between 2008 when the index value was set to 100 and 2023, gross office rents grew by about 33 percent. Manhattan, San Francisco, and Boston are among the biggest and most expensive markets for office space in the United States.

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 287 U.S. dollars annually. In second and third market in the ranking, Hong Kong and Midtown New York, prices also exceeded 200 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.

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 71,000 Colombian pesos per square meter. In Cali, the average rent of offices reached 56,900 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 54,500 Colombian pesos per square meter.

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.

In the fourth quarter of 2024, the average monthly rent for grade A office space in Hong Kong's Central district amounted to 847 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.

Heredia experienced the highest average asking rent for class A offices in Costa Rica in the second quarter of 2023. Heredia reported an average monthly rent of 20 U.S. dollars per square meter. Downtown San Jose and West San Jose also had rents higher than the average for all markets observed. On the other hand, Alajuela offered the most affordable commercial office spaces with the lowest asking rent among all districts, coming in at just 18 U.S. dollars per square meter.

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 53.3 U.S. dollars per square foot, while for suburban offices it was 35 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.

San Francisco's office rental market showcases significant variation across its submarkets, with Mission Bay commanding the highest rates at 138 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.

In the second quarter of 2023, the average rent for grade A office space in Beijing amounted to 315.8 yuan per square meter per month. The city was one of the major commercial hubs in China. Hence why rent for office space in Beijing was the highest among all cities in mainland China.

San Isidro West reported the highest average monthly rent for office real estate among all areas in Lima, Peru, in the first half of 2023. The average monthly rent in San Isidro West was almost 17.5 U.S. dollars per square meter. In contrast, Magdalena provided the most affordable offices with the lowest monthly rent among all areas of Lima, at 14.42 U.S. dollars 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.

The average monthly office rent per tsubo in Tokyo's central business districts amounted to around 20.3 thousand Japanese yen in December 2024. In July 2020, the average rent reached a peak of 23 thousand yen. Low office vacancy rates in Japan’s metropolitan areas prior to the pandemic In the years before the coronavirus pandemic, increasing rents for office space reflected a general downward trend in vacancy rates for office space in Tokyo's central business districts; Chiyoda, Chuo, Minato, Shinjuku, and Shibuya. Similarly, office vacancy rates in Osaka and other major cities in Japan were also declining steadily. Increasing commercial land prices in the metropolitan areas of Tokyo, Osaka, and Nagoya accompanied this development. Real estate investment in office property With an increasing demand for office space and rising rents, the office market played a growing role in commercial real estate investment. Office property has been among the leading types of property in the portfolios of Japanese real estate investments trusts (J-REITs) and accounted for around one-quarter of securitized properties in Japan.

The Central Business District (CBD) was the most expensive market for office real estate rental in Houston, Texas in the second quarter of 2024. The average direct asking rental rate of office space was approximately 43 U.S. dollars per square feet, compared to 17.5 U.S. dollars per square feet in FM 1960. Among the major office markets in Texas, Dallas had the most inventory, while Austin had the highest rental rates.

The average asking rent for office real estate decreased across all major markets in Latin America between the first half of 2019 and the second half of 2022. Buenos Aires had the most expensive office space at 23.7 U.S. dollars per square meter per month. Mexico City followed closely with monthly rent of 22.44 U.S. dollars per square meter.

The rent for office spaces in the United States is expected to continue to increase at a moderate pace until 2027, after rising by less than two percent in 2022. The strongest growth is forecast in 2027, when the average effective rent is projected to rise by 2.4 percent.

In the second quarter of 2021, the monthly rent for office space in Beijing amounted to almost 400 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.