The 5 Most Expensive Cities to Rent Office Space In (and How to Get It for Less)

If you want to buy office space in one of the world’s biggest cities, it’ll cost you, according to Knight Frank’s 2018 Global Cities Report. Knight Frank’s methodology was to take $100 million and see just how much space that would buy around the world. The results may not be that surprising, but they confirm an ongoing trend. Office space is getting more expensive, and new businesses are having to find smart new ways to circumvent this harsh reality.

It makes sense for entrepreneurs to found companies in the world’s business capitals. But with prices reaching new heights, it’s getting less and less feasible. But, the economy needs these fresh businesses to drive innovation and experimentation in the market. Thankfully, alternatives to traditional office rentals are emerging to combat rising prices.

First, let’s take a trip around the world and see what our $100m dollars will buy us. Then we’ll look closer at some of the ways new businesses can thrive in this expensive environment.

5. London

In London, $100m will buy investors exactly 43,899 square feet of office space. That’s less than one acre. For comparison, Google’s brand new campus in London’s King’s Cross will be 67 acres when it’s finished. Granted, very few companies will need this kind of space, but it’s clear buying an office here is expensive.

4. Zurich

Zurich is Europe’s second most expensive city. $100m will buy even less here than it will in London at 43,754 square feet. The Swiss business centre’s global makeup has made it an attractive destination for startups, but once again, office prices could prove a difficult hurdle.

3. Paris

As Europe’s most expensive city to buy an office in, you’ll only get 36,662 square feet for your £100m in the French capital. The dense composition of the city means prime space is bitterly fought over.

2. Tokyo

More expensive than anywhere in Europe, 31,282 square feet is all $100m will buy investors in Tokyo, inevitably leading to high rental costs for newer businesses.

1. Hong Kong

At just 11,698 square feet for $100m, Hong Kong is a whopping three times more expensive than Tokyo, it’s closest competitor. Knight Frank actually advises investors to take their money elsewhere. Rather than investing in any of these expensive cities, they should invest in other markets—office space in up-and-coming business centres that is likely to grow in value.

But where does this leave startups? Setting up a new enterprise in an up-and-coming business district is possible, but it’s much harder to gain global traction without working in a global city. And since office space is so valuable in many of the most strategically advantageous areas, rent, too, is often out of reach for new businesses without huge financial backing.

The best entrepreneurs rarely let anything stand in their way, so it’s no surprise that solid methods to maintain a city base without breaking the bank have emerged.

Virtual offices offer central locations without the price tag

Just as the price of purchasing commercial space in London has risen, so too has the cost of renting in the capital. In 2016, EY found that rents had risen by 70% in the preceding five years. In light of this, alternatives have presented themselves.

Virtual offices have surged in popularity. Instead of renting physical space in London, businesses can work from elsewhere, but still have a London address. Virtual offices give companies the appearance of being based in businesses centres by providing a postal address and local phone number. Companies like Landmark even allow businesses to create custom packages for London virtual offices by opting in and out of services such as call answering and mail forwarding.

Coworking lets small businesses share the burden

If a startup still can’t resist the physical draw of the big city, there are other ways to avoid costly rents. Coworking—the practice of sharing workspace with other businesses—has seen a popularity increase almost in line with the rise in office rents.

Companies like WeWork create offices in the most in-demand areas of major cities, and allow several companies to share on flexible, (relatively) affordable contracts as they work in one shared space. Packages range from single desks to custom builds, all of which are cheaper than conventional rental leases.

Coworking is not just popular for financial reasons. It’s been suggested that co-working arrangements can actually make employees happier as it allows for open space, collaboration, and autonomy.

With these two approaches, startups are still able to thrive, even in the most expensive areas of office real estate.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.