Office rent hikes hit worlds top 10

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					Office rent hikes hit world's top 10

Geoffrey Scotton
Calgary Herald

Thursday, February 15, 2007

Soaring prices for office space in Calgary in 2006 have placed the city on the top ten list of
cities around the world that experienced galloping cost increases last year.

Cushman & Wakefield LePage Inc. said Wednesday that Calgary's 47 per cent increase in
downtown office rental rates in 2006 placed it in eighth spot globally among cities that
experienced major office space rent

increases. Topping the list was Abu Dhabi in the United Arab Emirates, where rents jumped
200 per cent.

"Calgary has moved firmly onto the world stage as a hot market," the commercial real estate
brokerage said Wednesday.

However, while the pace of Calgary's office space price increase and the price itself -- at
$43.84 US per square foot, 28th-highest in the world -- elevates Calgary to a rarified
international level, it has repercussions for Calgary's cost competitiveness, experts say.

"We are now, from an office cost perspective, unable to compete on cost when it comes to
Canadian jurisdictions," said Adam Legge, director of research and business information for
Calgary Economic Development. "We are the most expensive office property in Canada."

Nonetheless, Legge argued Calgary is still attractive as "definitely the western Canadian, if not
the Canadian's centre of economic activity. A lot of companies want to be at a location where
that kind of intensity, that kind of economic activity is taking place."

Aside from Calgary and Abu Dhabi, all other entries in the top ten list produced by Cushman &
Wakefield LePage's international parent, Cushman & Wakefield Inc., were in India and
included several areas of Mumbai, New Delhi and Chennai.

No. 10 on the list was the central business district of Pune, India, where rents increased 46
per cent.

The most expensive place, by far, on the globe to operate an office remains London, England's
west end, the world's perennial high-water mark for expensive corporate digs. The coveted
area of the U.K. capital had total occupancy costs of $247.17 US per square foot in 2006.

Trailing in second place was Tokyo, Japan, at $182.88 per square foot and in third spot Hong
Kong, China at $177.78 US per square foot. Rounding out the top ten were Paris, France, at
$123.98 US; the Central-Worli district of Mumbai, India at $120.15 US; Dublin, Ireland at
$100.85 US; Moscow, Russia, at $96.72; Milan Italy at $85.49 US; midtown New York, U.S. at
$81.93 US and Dubai, U.A.E. at $79.93 US.

Chris Anderson, vice-president and general manager of Cushman Wakefield LePage's Calgary
office said the frenzied pace of 2006 in Calgary has cooled slightly as 2007 has unfolded, but
remains strong.
"It's still good old supply and demand," said Anderson. "I think we're going to continue to see
moderate increases as long as the demand is still there."

Currently there is about 32 million square feet of space in Calgary's downtown core, with fairly
firm expectations that as much as four million square feet will be added over the next four
years. About 1.6 million square feet of new space is expected to come onto the market this

In some cases, costs for space have spiralled so high that some companies are having to go
outside the downtown core to find space they can afford. "They are already balking. The guys
that don't have to be downtown are looking out to the suburbs," said Anderson.

He noted that Calgary's overall occupancy cost has been pushed up by rising rents rather than
escalating operating costs and taxes, and forecast continued modest increases in rents in

At the same time, sharply rising construction costs have pushed up the cost of new buildings
to the area of $300 per square foot or more and those costs are being passed on to tenants.

"To make things work with today's higher construction costs, you need a higher rent.
Construction costs have really driven it," said Anderson.