London's Office Space
Remains the Most Costly

London's office space is by far the most expensive in the world, more than twice as costly as space in the toniest districts of Tokyo or New York, according to a new survey. Paris is the second-most expensive, and Hong Kong returned to the top five after rents more than doubled there in 2004.

The annual survey, by Cushman & Wakefield Inc., a New York commercial-real-estate-services firm, measured total occupancy costs for the 202 most-expensive districts in 47 countries. Rents account for most of total occupancy costs, but taxes and utilities also make up a significant part of a company's expense for office space.

Costs are rising in many major markets, the survey said, reflecting the synchronized global economic rebound that strengthened last year. Occupancy costs were up or flat in two-thirds of the markets in the survey last year, compared with half of the markets in 2003.

Office space in the Mayfair district in London's West End costs an average $199 per square foot per year, up about 20% from $165 a foot in 2003. The West End historically has led the world in occupancy costs, due to height restrictions, limited room for expanding in the district's outskirts, and taxes that can be 40% of annual rents, said James Charnaud, director of client services for Cushman & Wakefield.

Occupying space in Paris's central business district costs $120 a square foot, up 13% from $106 the previous year. Tokyo's Centre district was third-most expensive, with occupancy costing $92 a square foot, about what it cost in 2003. New York's Midtown was fourth at $86 a square foot, up a bit from the prior year's $85 a foot.

Hong Kong's Central District soared to No. 5 last year from No. 17 in 2003, with occupancy costs surging to $81 a square foot from $47 the previous year as rents more than doubled. Hong Kong historically is a volatile office market, and rents are still 42% lower than the high reached in 1997. "The driver behind [the rapid increase is that] the financial institutions were particularly active in the Hong Kong market," said Bruce Mosler, president and chief executive of Cushman & Wakefield.

Expansions by financial institutions, many of which notched record profits for 2004, led much of the activity across the world last year. "In the U.S., the legal-services industry has led absorption," Mr. Mosler said. "But this year, in the Northeast and particularly in New York, the financial institutions led the legal industry, and that was the first time in several years."

For 2005, Cushman & Wakefield forecasts costs to continue to rise in the top office districts around the world because of continuing demand and a shortage of top-quality space in prime areas.

Email your comments to rjeditor@dowjones.com.