Network of business office-space costs

The cost of renting or leasing office space differs dramatically around the world. This is obviously of great importance to businesses, as their profitability depends on the balance between income and costs. Their expenditure on office space can thus determine whether or not it is profitable for them to do business in certain cities.

The CBRE Group Inc. is an American commercial real estate company, and they provide an annual Global Prime Office Occupancy Costs report that addresses this business cost. It is a survey of office occupancy costs for prime office space in a large number of cities worldwide. Occupancy costs for business premises represent rent, plus local taxes and service charges. The report notes that: "The occupation cost figures have also been adjusted to reflect different measurement practices from market to market."

Each report lists the top 50 most expensive office locations in the world during the previous year, along with the average occupancy cost (in US$ / sq ft / annum). The locations examined may be the central business district of each city or several parts of some cities, depending on how much office space is available. The list of locations continues to expand every year, but only the top 50 are ever listed in each report.

The CBRE web site currently contains the data for the years 2008-2010 and 2012-2014. There are 71 locations that have appeared in these six top-50 lists, although only 30 of them have appeared in the top 50 in all six years (and seven have appeared only once).

Of course, a phylogenetic network could be used to visualize the data for each location across the six reports, as a tool for exploratory data analysis. To create the network, I first calculated the similarity of the 30 main locations using the Gower similarity; and a Neighbor-net analysis was then used to display the between-location similarities as a phylogenetic network. So, locations that are closely connected in the network are similar to each other based on their office costs across the six years, and those that are further apart are progressively more different from each other.

The network shows a gradient of decreasing office costs, from bottom-left to top-right. So, the consistently most expensive locations have been the West End of London and central Hong Kong, followed by Moscow and central Tokyo. London City and Kowloon, in Hong Kong, are not far behind, showing that you cannot avoid high costs for prime office space in these two cities.

Across the locations, the most expensive ones cost on average 3.4 times as much as the cheapest locations. Note that Midtown Manhattan is not nearly as expensive as people might think, and certainly not as expensive for office rental as it is for living accommodation. Switzerland has only two cities (Geneva, Zurich), and both of them are in the middle of the network; so it is not cheap, either. Australia has five main cities but only to of them are in the list (Perth, Sydney) — Sydney is also one of the most expensive cities in the world for general living expenses.

In the network, Dubai and central Mumbai are somewhat isolated from the other locations because their office rents have decreased over the six reports, unlike any of the other locations. In the case of Mumbai, the most expensive offices recently have been in the Bandra Kurla complex, instead of Nariman Point.

So, if you are planning on expanding your business globally, you now know where to avoid.