Competition for best-in-class office space continues to drive costs higher, although expanding supply in selected markets is creating opportunities for corporate real estate teams to manage costs
Contents
Prime office markets remain characterised by a flight to quality. Organisations continue to prioritise premium offices, concentrating demand on the best buildings in the most desirable locations. This is particularly evident in markets such as Singapore, London City and Seoul, where limited availability of best-in-class space and resilient demand continue to place upward pressure on costs.
Some markets, however, are witnessing a slowing pace of occupier cost growth for best-in-class offices. Markets such as Madrid are seeing improved availability as new developments and refurbishments complete, creating opportunities for businesses to access high-quality space amid more moderating cost rises. This reinforces the importance of understanding local supply dynamics alongside headline rental trends when making real estate decisions.
Another key theme is the growing influence of AI and technology occupiers. In cities such as San Francisco, London and Shenzhen, demand from AI firms is rapidly absorbing high-quality space and intensifying competition for the most desirable offices.
This report examines best-in-class prime office space, focusing on trophy or ultra-prime buildings that often follow different market dynamics from the wider Grade A office market. For a full definition, see article notes.
Key takeaways:
- Across the 47 global cities we analyse in this report, prime office occupier costs rose by 1% in Q2 2026, bringing the year-on-year change to 5.3%.
- Markets with significant quarterly cost rises include San Francisco (8% in Q2), Warsaw (2% in Q2), and Seoul (4% in Q2), where limited availability of best-in-class space and resilient occupier demand continue to place upward pressure on costs.
- Demand from a diverse range of businesses, combined with limited changes to landlord incentives, continues to reinforce premium pricing across many of the world's business centres.
Regional highlights
Net effective occupier costs increased across 28 of the 47 cities analysed in Q2 2026, reflecting continued rises in gross rents and ongoing pressure on fit-out costs. By region, occupier costs rose by 0.5% in EMEA and Asia Pacific and 2.1% in North America.
US cities are among the fastest-rising occupier cost markets globally. Several US markets recorded above-average quarterly cost rises. Notably, San Francisco, Downtown New York and Washington DC were among the markets seeing the fastest cost rises globally. These are all markets where demand for best-in-class, highly amenitised space remains robust.
San Francisco recorded the largest increase in occupier costs of any market this quarter, rising 8%. After a prolonged period of subdued demand, the city's office market is experiencing a notable resurgence, with overall leasing this quarter up 130% against the five-year average.
This recovery is being fuelled by the continued growth of the AI sector. From established firms such as Anthropic to fast-growing start-ups including Together AI, AI companies are taking significant amounts of space as they scale.
AI occupier demand is concentrated in high-quality space and top-performing sub-markets, reinforcing a growing divide in the San Francisco market. While overall office availability across San Francisco remains elevated at 28%, the best buildings in the most desirable locations are seeing stronger competition and rent increases.
San Francisco leasing volumes see AI centred uplift
Downtown New York also witnessed sharp increases in net occupier costs, up 5.6% over the quarter. While Grade A office availability remains around 18%, availability is tightening more rapidly at the very top of the market, limiting occupier choice and placing upward pressure on rents for best-in-class space.
The Asia Pacific region recorded a modest 0.5% increase in occupier costs this quarter, although the regional average continues to mask a widening divergence between mainland China and the rest of the region.
Occupier costs across the four mainland Chinese markets we monitor fell by 1.7% in Q2 and are now 3.2% lower than a year ago. Excluding China, occupier costs increased by an average of 1.5% over the quarter and 7.4% annually, highlighting continued strength across many of Asia Pacific's established office markets.
Australian markets and Seoul recorded some of the largest quarterly increases, with occupier costs rising by more than 3%. Despite softer leasing activity, Seoul continues to face a shortage of high-quality office space, supporting rent increases. A similar supply dynamic is evident in Sydney and Melbourne, where limited development activity and rising construction costs are constraining the future pipeline of prime offices. Melbourne, which has lagged Sydney's recovery since the pandemic, is now seeing demand continue to improve.
Mainland China remains the region's clear outlier. Occupier costs have fallen by 14% over the past two years as significant new supply has coincided with subdued economic growth and weak business confidence. While all four Chinese markets continue to soften, Shenzhen has proved comparatively resilient, supported by the continued expansion of its technology and AI sectors.
Singapore has strengthened its position as a regional headquarters location, benefiting from its business-friendly environment. Net occupier costs in this market have increased by 7% since 2019, with the pace of increase accelerating in recent quarters. Low vacancy rates and a limited development pipeline are expected to contribute to continued rises in occupier costs in the near term.
Singapore sees continued demand as a regional international business hub
Europe, the Middle East and Africa recorded a 0.5% increase in net effective occupier costs.
London City and Warsaw recorded notable quarterly increases in occupier costs, rising by 1.1% and 2.2%, respectively. In London, strong demand for premium offices and the high specification of new developments have contributed to increases in both rents and fit-out costs. Similarly, limited availability of prime space continues to increase occupier costs in Warsaw, although a pipeline of new developments due for completion from 2028 onwards should gradually improve supply conditions.
Madrid has benefited from sustained international office demand, supported by a growing economy and its role as a gateway between Europe and Latin America. While occupier costs have risen by 26% over the past seven years, the pace of increase has moderated more recently as rental growth has slowed.
Much of this moderation in Madrid can be traced to changing supply dynamics. Around 71% of new supply completed in 2025 and 2026 will come from premium refurbishments, which has allowed developers to deliver modern workspace more quickly than through ground-up development. For corporate tenants, the improved availability of high-quality city-centre offices should help ease upward pressure on costs while expanding choice.
Redevelopment schemes help moderate costs in Madrid
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).