There are several reasons it's great to do business in the good ol' US of A. Cushman & Wakefield highlighted one of the most important rationales in a recent report, which revealed that U.S. markets are a value versus their international competitors in terms of occupancy costs.

Of the top 15 most expensive global commercial real estate markets, only three were in the United States - Boston (12th, $48.12 per square foot), Midtown Manhattan (13th, $47.72 per square foot) and San Francisco (14th, $45.96 per square foot).

"What keeps the [United States] less expensive is less restrictive zoning and the availability of buildable sites. This results in larger amounts of class A space from which to choose," said Maria Sicola, Cushman & Wakefield senior managing director, research services.

In the survey, global occupancy costs were defined as base rent, plus property taxes and operating expenses.

Meanwhile, in the Asian markets things are stagnating. Asia traditional has had the highest occupancy costs, but these are dropping as the Asian flu takes its toll on local markets.

Tokyo had the highest occupancy costs in the world for many years until last year, when London-West End became the most expensive. This go-round, Tokyo finished third at $95.63 in 1999. Hong Kong, long one of the two or three leaders, dropped to fifth, at $63.64. Rents in most Asian markets have dropped 50 percent over the last two years.

What is perhaps most striking about the survey is the incredible economic difference between the most expensive market and the 15th most expensive market. London's West End ranks at the top of the list, with occupancy costs of a shocking $126.85 per square foot. Number 15, Stockholm, costs far less than half that at $45.05.

Cushman & Wakefield attributes the strength of London's West End and London's City market (2nd, $105.90) to a growing British economy, low interest rates, availability of skilled labor, high quality transportation and increased business confidence.

By the way, all statistics are as of mid-year 1999.

The complete list is as follows:

Now, if someone could just explain to me why things are so expensive in Mumbai...

Meanwhile, Deloitte & Touche and the National Association of Office and Industrial Properties (NAIOP) have put together a U.S. study of industrial properties.

The study concluded that industrial properties in the Northeast continue to be most expensive, with media rent of $5.10 per square foot. Next comes the South ($4.75), Midwest ($4.40), and the West ($4.36).

The Northeast remains most profitable, at $4.88 per square foot in net operating income. The West moved into a distant second ($4.25), followed by the South $4.11) and Midwest ($3.81).

The space you really can't afford is in San Jose ($10.78 rent), but the landlords there are making a fortune ($10.52 net operating income). Why? Office space is rare in San Jose, so industrial has been converted to cube farms - 72 percent of survey respondents reported that their San Jose office space is being used for "business service."

Published: October 20, 1999

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net