The five highest "Occupancy Cost " markets in the United States and Canada all feature average gross asking rents of over $35.00 per square foot. Given that these rents are market wide averages, your company could end up experiencing even higher office rent expenditures. However, if you need to be in any of these markets, there are ways to manage costs and make even the most expensive space more affordable than it seems.
New York City
As of the first quarter of 2016, the New York City market had average rents of $75.35 per square foot, according to research from a well-respected global commercial real estate organization. Given that lower cost markets like the Bronx and Staten Island are included in this average, spending over $100 per square foot for Class A space in highly desirable Manhattan submarkets is common.
In exchange for the high rent (and high additional "Occupancy Cost " factors), your company gains an address in the business center of the globe. You also receive access to one of the most highly educated and diverse workforces in the world.
The San Francisco Bay Area
This market comprises both Silicon Valley and the seemingly-app-driven City of San Francisco. While the former offers proximity to the companies that underpin most of modern life, San Francisco makes the programs that run on them and that help us use them to stay connected. As with New York, the average "Occupancy Cost " of $59.59 is a broad average, and much higher rents are common.
Vancouver, BC
While Toronto is Canada's largest city, with rents of $39.93 per square foot, Vancouver is its most expensive from the perspective of office space. Interestingly, though, while offices are expensive in Vancouver, wages for workers and rents for tenants are significantly lower than in other high-cost cities like New York, San Francisco and Boston.
Washington, DC
America's capital is also home to some of its most expensive office space, with average rents falling at $36.50. While Washington is a government center, submarkets in northern Virginia can legitimately lay claim to being one of the original homes of the Internet. The intersection of government, military and technology help to keep demand for both educated worker sand for high quality office space high.
Boston, MA
Arguably the leading college town in the United States, with average rents of $36.06, Boston is also the fifth most expensive office market. A combination of scarce land, higher costs of living and doing business, and a highly educated STEM workforce justify the high cost. Boston can claim to be the equal of West Coast markets for computer workers, is home to major financial services firms, and is a leader in biotechnology.
Affording High "Occupancy Cost " Markets
If your company needs to be in one of these high "Occupancy Cost " markets or in other expensive locations like Los Angeles, Toronto, Miami, Austin or San Diego, you ultimately have two choices:
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Control costs by taking less space
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Manage the rent portion of "Occupancy Cost " by paying less elsewhere
Opting for flexible workspaces can help to reduce space demand. Another is to reconsider how you assign space. Knight Frank research shows that the typical company in New York gives support staff 100 square feet, 150 sf to professionals and 250 to executives. Following the London norm of 100, 120 and 180 sf can significantly reduce office size and expense. Another option is to look at lower cost and lower wage markets like Top 10 Austin and Miami where your rents are more than covered by other savings.
Source: http://www.knightfrank.com/resources/global-cities/2016/all/global-cities-the-2016-report.pdf
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