Total occupancy cost is defined as the average total cost of leasing office space. It includes rents, property tax and operating expenses, such as maintenance costs, if these are normally payable to the landlord. It excludes leasing incentives, such as rent-free periods and fitting-out costs, as well as facilities costs specific to the tenant, such as cleaning or IT (information technology). It also excludes amortisation of capital and related expenditure. In the US, operating expenses include the basic cleaning of tenant space.
Space utilisation standard per workstation is defined as the usable area (the RICS’s definition of Net Internal Area - NIA) divided by the number of planned workstations for which the space is intended. It relates to the type of occupier that typically occupies prime Grade A office space and provides a comparison of the amount of space required in different business districts, based on a given number of workstations. The space utilisation standard does not change significantly from year to year as it is closely correlated to long established working cultures and styles, building design, and nature of the office markets. Nevertheless, it does evolve over time, reflecting changing work styles and technology.
Total occupancy cost on a per workstation basis provides a better comparison of costs around business districts, as it reflects the way organisations occupy and use space in different parts of the world.
Buildings newly developed or comprehensively refurbished (involving structural alteration, and/or the substantial replacement of the main services and finishes), not previously occupied, including sublet space not previously occupied.
Prime rent is the highest rent that could be achieved for a typical building/unit of the highest quality and specification in the best location to a tenant with a good (i.e. secure) covenant. (NB. This is a net rent, excluding service charge or tax, and is based on a standard lease, excluding exceptional deals for that particular market.
Tax and operating expenses (otherwise known as outgoings) include maintenance costs and property tax (if these are normally payable to the landlord), as well as ’common charges‘ paid to the landlord, however exclude company specific facilities management hard or soft services such as cleaning, IT (information technology), catering etc. In the US, janitorial (cleaning) services of a tenant’s office space are usually included in grade A office space in key markets.
Rentable area is the total of all covered areas paid by the tenant. There is no standard global definition of ‘rentable area’; whilst a handful of countries have an official measuring code, the majority rely on accepted local market practice, whilst in some emerging markets the definition of a ’leasable square metre‘ may vary depending on the landlord. This means that €200 per sq m in Paris does not compare to €200 per sq m in Delhi. For cross-border comparison, this report uses conversion rates based on the RICS Net Internal Area (NIA) definition.
Usable area defined on the basis of the RICS Net Internal Area (NIA) definition refers to functional space used by the occupier. It includes internal circulation space and meeting rooms. The area occupied by partitions within the premises is considered part of the net usable area as partitions are often an occupier’s option. It excludes areas occupied by structural columns and common areas such as stairwells, lifts, lobbies, external walls, vertical ducts and common passages that are not used exclusively by the occupier.
Cushman & Wakefield’s primeness level indicator provides a view on how close to the ’prime rent‘ a given building or location is. In a city where the prime rent is $ 100/sq m/year, a building with a rent of $ 80/sq m/year will have a ’primeness‘ level of 80%. It is a very useful KPI (key performance indicator) to compare locations across multiple cities. It allows occupiers to spot inconsistencies in international urban locations, such as why a given organisation or industry would require a “primeness” level of 50% in one city against 90% in another?
The height of a building has a significant impact on its floor plate efficiency in terms of ‘net’ to ’gross‘ area ratio (NIA – Net Internal Area / GEA – Gross External Area ratio). Height requires a significant increase in the relative proportion of vertical penetrations (and even external envelope thickness) in the total floorplate area. In countries where these elements are included into the rentable GLA (Gross Lettable Area), increased building height may mean that an increased amount of rentable space will have to be leased to cope with occupational net requirements. As a result we have provided the option to choose between low, mid and high rise building options to model occupancy costs. There is no consistency in categorising office building heights internationally and we have adopted a Cushman & Wakefield specific definition with low rise office buildings being below 5-7 floors, whilst high rise would in fact represent skyscrapers exceeding 25-30 floors.
Global Occupancy Costs – Offices is a unique Cushman & Wakefield annual report presenting the costs of occupying prime office space across 126 markets worldwide. The report presents Cushman & Wakefield global ranking of occupancy costs and provides commentary for each region. Furthermore, it considers the impact of different economic scenarios and analyses occupancy costs for average-grade buildings in selected markets.