As companies look to expand their global operations into emerging markets and strengthen their foothold in existing locations, the corporate rental market is changing, especially in major cities.
According to the Knight Frank Global Corporate Lettings Review, the average number of employment visas for skilled workers granted in 2013 rose by 12% across the UK, US and Hong Kong as multinational firms look to expand their footprint overseas.
This is reflected in a 21% rise in the lets to corporate tenants in New York, with a 7% rise in London and a 16% increase in Hong Kong.
The changing trend in corporate housing budgets is also highlighted by the fact that corporate tenants are increasingly taking personal leases in order to save some of their allowance.
Prime residential rents in New York have risen by 32% since the fourth quarter of 2010. As a result, junior executives have been targeting some of the city’s outer boroughs. While central Manhattan may be out of reach for those with lower budgets, there are new developments springing up in areas slightly further afield.
The report says that for those working in central New York, a commute of just under an hour is preferable. This means that areas benefiting from excellent transport links into the central business district have seen a spike in interest in recent years as corporate tenants take advantage of lower rents and larger properties. This is particularly evident in markets including Long Island and Brooklyn.
In terms of new commercial developments, into which tenants may find themselves commuting, with the exception of 1 World Trade Center, no major buildings are due for completion until late 2015, when 1045 Avenue of the Americas along with 10 Hudson Yards should come on the market.
Next up will be 3 World Trade Center in 2017, followed by 30 Hudson Yards and 425 Park Avenue. After 2018, there is the potential for approximately 10 million square feet of new office construction, with about 78% of that either in Midtown South or Downtown Manhattan.
Rents have fallen through most of Hong Kong as corporate employers continue to reduce both their cost and liability by providing cash allowances for employees to enter into personal rather than corporate leases, and significantly increased stamp duties for purchasers have impacted on sales, thereby encouraging potential vendors to let out.
Junior executives on tighter budgets have widened their property search with Tai Kok Tsui and Tseung Kwan O emerging as popular residential areas. Both are well served by the MTR (metro) and bus routes, home to a variety of shops and entertainment facilities and house several large residential developments.
Olympian city is a mixed use complex at West Kowloon and consists of several private housing estates. Surrounding these are several other estates ranging from moderately priced to more luxurious options such as those at One Silver Sea and Imperial Cullinan. Tseung Kwan O is a bay in Sai Kung District. The Tseung Kwan O New Town, one of the nine new towns in Hong Kong, houses new luxury residential developments including The Wings and the more moderately priced Lohas Park.
The report points out that traditionally London’s commercial real estate market has been concentrated around the West End and the City.
While these areas remain the focus of businesses relocation searches, in the last few years new markets have emerged creating new business clusters, employment opportunities and residential schemes.
The next decade will see the emergence of more new markets as occupier demand strengthens and working practices evolve. The redevelopment of King’s Cross has secured tenants including Google and BNP Paribas. In Battersea, foreign Embassies including the US and the Netherlands are relocating, with China believed to be following to join them in Embassy Quarter.
These areas offer more than an office location as their mix of commercial, residential and retail makes them a destination and a place to ‘work, rest and play’. In the northern City fringe, planning permission is in place for residential and commercial schemes, driven by demand from London’s growing creative industries.
‘While demand for corporate accommodation is up, cost remains an issue with corporate budgets for housing generally lower than before the financial crisis. This is partly as a result of companies keeping a keen eye on costs, and partly as a result of a shift towards personal leases as individuals opt to make savings on their housing budgets,’ said Liam Bailey, global head of research at Knight Frank.
This article was republished with permission from Property Wire.