Contents

• Quarterly highlights
• Deep dive: Tokyo
• Deep dive: New York - Midtown
  
  

International demand from diverse occupiers for best-in-class offices and limited changes to landlord incentives reinforced premium pricing in major business markets. Across the 47 cities we analyse in this report, prime office occupier costs rose by 0.7% in Q1 2026, bringing the year-on-year change to 5%. This quarter, Manila, Oslo, Johannesburg, Lagos, Mexico City, Atlanta and Dallas have been added to our reporting.

Focal points:

• In Q1, average net effective occupier costs increased by 0.7%, bringing total cost increases to 5% over the last 12 months
• Stand-out markets include Tokyo (12.7% in Q1), New York (Midtown) (4.2% in Q1), and Dublin (4.8% in Q1) where tight supply and steady demand for best-in-class buildings have driven cost growth
• Net effective costs continued to rise steadily, as average global costs have increased by 9.1% over the past two years

Regional highlights

Across the 47 cities we analyse, net effective occupier costs rose in 23 cities this quarter, driven by rising gross rents and fit-out cost pressures. Regionally, costs in EMEA increased by 1%, in North America by 0.7%, and in Asia Pacific by 0.4%.

The Asia Pacific region registered a 0.4% overall cost increase this quarter, despite continued decreases in China. Across the four mainland Chinese hubs we monitor, occupier costs declined by 2% in Q1, with the rate of decline moderating over the past year. By contrast, across Asian markets excluding China, occupier costs rose by an average of 1.4%, driven primarily by rises in Tokyo (up 12.7%), underpinned by robust demand and persistent supply constraints.

Europe, the Middle East and Africa recorded a 1% increase in net effective occupier costs. Several markets across the region experienced notable shifts. In Dublin, costs rose by 4.8% this quarter, driven by increases in both rents and service charges, partly reflecting a slowdown in new development pipelines. In Milan, occupier costs increased by 3.5%, supported by rising rents and a slight reduction in rent abatements, largely due to strong demand for prime space.

North America saw modest net occupier costs rises this quarter, averaging 0.7%. New York (Midtown) and San Francisco were exceptions, where costs increased 4.2% and 2.4%, respectively. In San Francisco, the continued success of AI firms has driven a resurgence in prime office leasing, with Perplexity AI relocating 80,000 square feet into 181 Fremont Street, a building in our top five basket. This wave of demand has tightened availability in top-tier buildings, placing upward pressure on prime rents.

Seven new markets enter our report

In Q1 2026, we expanded our dataset to include a mix of fast-growing and strategically important business locations: Mexico City, Atlanta, Dallas, Manila, Oslo, Johannesburg and Lagos.

Mexico City stands out as a key business centre within a rapidly expanding economy. The city continues to benefit from nearshoring trends that underpin strong levels of foreign investment and occupier demand. Submarkets such as Polanco, home to the recently completed SOMA Chapultepec tower, are particularly sought after given the city’s growing concentration of technology firms. This is exemplified by Google’s recent 107,000 square foot expansion in the submarket to accommodate continued headcount growth, reinforcing the city’s position as an emerging tech hub.

Atlanta is a major business hub, home to the headquarters of 18 Fortune 500 companies, including The Coca-Cola Company and Delta Air Lines. The state of Georgia’s competitive, pro-business environment continues to underpin strong corporate confidence, supporting the attraction and retention of major occupiers. Midtown remains the city’s premier location for prime office leasing, with rents approximately 16% higher than those in the central business district.

Dallas–Fort Worth is the fourth-largest metropolitan area in the United States by population. The region benefits from a large and well-educated workforce and a highly pro-business environment, driving sustained in-migration of major businesses from across the country. Over the past year, leasing activity has remained robust, with three of the last four quarters exceeding the five-year quarterly average. This reflects strong demand. Prime office demand is concentrated outside the traditional central business district, with Uptown emerging as the leading submarket, where rents are approximately 54% higher than those in downtown Dallas.

Manila is a key market in South East Asia for international businesses looking to tap into a large pool of talent at a similar cost point to comparative markets such as Kuala Lumpur. Costs in this market have remained stable over the long term, with only a -0.4% decrease over the past two years.

Oslo, the first Nordic city to be included in our report, is comparatively small by population, but punches above its weight as a major hub for multinational businesses. Much like other European markets, high construction costs dampen the development of new supply. As a result of strong demand and limited new supply, net effective costs in the market have risen by 6.6% over the past year, slightly above the regional average of 5.2%.

Johannesburg represents the business capital of South Africa, a dynamic market with several distinct prime office submarkets. Sandton is home to many major banks and advisory practices, while Rosebank represents a well-connected walkable urban neighbourhood with a strong tech and multinational presence. Johannesburg is the most affordable market on our list, with average prime office occupier costs of $36 per square foot annually, a cost-efficient option for businesses looking to grow into the expanding local and regional markets.

Lagos, the second African market joining our report, is the capital of one of the fastest-growing cities and economies in Africa. The market features a diverse mix of businesses across several submarkets, such as Victoria Island. Prices in prime locations are dollar-denominated, which boosts costs but provides more certainty and stability against potential local currency depreciation. This stability results in minimal quarterly changes, but landlords may be more willing to negotiate on incentives and concessions on a deal-by-deal basis.

Tokyo tightens as costs accelerate in the last year

Tokyo recorded a 12.7% increase in occupier cost this quarter; the sharpest increase recorded in the market in since we began the prime office costs report six years ago. Gross rents across the top five buildings remained broadly flat between 2022 and 2024, reflecting subdued demand and wider economic uncertainty, while rising labour costs and fit-out materials drove cost increases. By 2025, this dynamic had shifted: despite rising fitout costs, strong corporate profitability and sustained occupier demand for larger, higher quality offices drove prime building vacancy close to zero.

Market conditions have tightened further due to a shrinking development pipeline, with fewer completions expected in 2026 than in 2025. In response, landlord behaviour is evolving: some are raising headline rents even in fully occupied buildings to establish higher benchmarks for the future. At the same time, inflation-linked lease structures are becoming more common, reflecting Japan’s post-pandemic return to sustained inflation of 2% or more. Together, these trends point to continued upward pressure on occupier costs in the near term.

Rising costs and fading incentives in NEW YORK (Midtown)

Analysis of occupier cost components in New York’s Midtown market shows a clear shift in the drivers of cost growth in recent years. In the immediate post-pandemic period, landlords offered elevated incentives to attract occupiers and secure long-term leases. As demand for best-in-class space recovered, these incentives - particularly rent-free periods - began to unwind and have since moderated to just above 2022 levels.

Unlike concessions, combined costs (comprising gross-rent and fit-out costs) have increased steadily over the same period. The resulting divergence - rising costs alongside moderating incentives - has driven a 28.7% increase in net effective occupier costs in Midtown since Q1 2022. Leasing activity in Manhattan reached 12 million square feet in the past quarter for only the second time since 2021, with two-thirds of these quarterly transactions occurring in Midtown, signalling the continued strong interest in the market.

METHODOLOGY 

The Savills Prime Office Cost (SPOC) Index presents a quarterly snapshot of occupancy costs for prime office space throughout the world, as provided by our expert, local tenant representation professionals and researchers. 

The adjusted annual all-in occupancy cost represents real-time transaction terms for 20,000 square feet (2,000 square metres) of usable space based on a basket of the top five most expensive properties to calculate ultra-prime average.

All costs are reported in an annual, standardised format of USD per square foot of usable space to account for variations in currency, reflect local payment protocols, and adjust for measurement practices across the globe. We have also factored in the credit value to the tenant generated from abated rent and the cost associated with fitting out the premises in order to provide an ’all in‘ total occupancy cost in USD per usable square foot. 

The fit-out costs were gathered from local Savills teams assuming the leasing scenario described above, plus the following: 

i) 30% cellularisation with the remainder of space open plan,

ii) construction and cabling only (no furniture or professional fees).