Los Angeles remains one of the least expensive places in the world to lease office space when compared with other international business centers of its stature, according to a survey of occupancy costs in major cities.
The cost of occupying a square foot of the most expensive office space in Los Angeles is $44.50 a year, according to the survey, which ranked Hong Kong as the most expensive place in the world to rent office space ($117.54 per square foot). London's West End ranked second at nearly $117, while London city ranked third at about $109.
The $44.50 figure ranked Los Angeles 18th among the 38 international business centers in the survey, which was conducted by the London-based Richard Ellis Group Ltd., a wholly owned subsidiary of New York-based Insignia/ESG Inc., a commercial real estate services company.
Los Angeles ranked fifth among the 10 U.S. cities in the survey, behind midtown Manhattan ($72.89), Washington ($49.45), San Francisco ($46.50) and Chicago ($45.05).
The figures for each city reflect the highest rents paid for prime, or Class A, office space. In Los Angeles, for example, the figure is based upon the highest rental rates paid for space in the most sought-after buildings in such Westside business neighborhoods as Century City and Santa Monica.
Relatively few businesses in Los Angeles are paying rents that approach the $44.50 figure, however, because the calculations are based upon the costliest leases in the most expensive buildings.
Much Class A space is available in downtown L.A. and a number of other markets at considerably lower rental rates, for example, and rents are even lower in less prestigious, Class B and C buildings in L.A.
But the survey focused on the highest office rents in each city, rather than listing a range or an average of rents, on the theory that companies operating internationally tend to take space in the best buildings available.
Tokyo's outer-central district, once one of the most expensive international office markets, ranked 10th in the world, reflecting "the precipitous decline in Japan real estate values over the past decade," according to the survey.
The survey shows Los Angeles is cheap compared with other cities in the top tier of international business centers, said John W. Ollen, regional director at Insignia/ESG.
"Relative to the others, L.A. is one of the best bargains there is," Ollen said.
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Commercial Rents Around the World
Occupancy costs (per sq. ft. per year, in U.S. dollars)
Hong Kong: $117.54
London West End: 116.83
London city: 108.97
Midtown Manhattan: 72.89
Birmingham, England: 56.24
Glasgow, Scotland: 47.84
Manchester, England: 47.10
San Francisco: 46.50
Frankfurt, Germany: 45.45
Los Angeles: 44.50
Prague, Czechoslovakia: 41.53
Dallas/Fort Worth: 36.26
Sydney, Australia: 36.12
Dublin, Ireland: 35.74
Source: Richard Ellis Group Ltd. and Insignia/ESG