Prime office costs continue to rise around the world, says Savills

Prime office costs in major global cities continued to rise in the first quarter of 2026, driven by strong demand for high quality workspace and limited availability, according to Savills. The real estate adviser says net effective occupier costs, including rents and fit-out costs, increased by 0.7 percent globally during the quarter. That brings the annual increase to 5 percent and the rise over the past two years to 9.1 percent. Savills tracks 47 cities worldwide and found that occupier costs increased in 23 of them during the first three months of the year. Costs rose by 1 percent across EMEA, 0.7 percent in North America and 0.4 percent in Asia Pacific.

Tokyo and Midtown Manhattan recorded the largest quarterly increases, with occupier costs rising by 12.7 percent and 4.2 percent respectively. Savills says both markets are experiencing strong demand for a limited supply of premium office space.

In Manhattan, overall leasing activity reached 12 million square feet in the first quarter, only the second time this level has been reached since 2021. Around two thirds of transactions took place in Midtown.

Savills says Asia Pacific recorded the lowest regional increase overall, partly because of continued declines in mainland Chinese markets. Occupier costs across the four Chinese hubs monitored by the company fell by 2 percent, although the pace of decline has slowed over the past year.

Outside China, occupier costs across Asian markets increased by an average of 1.4 percent, led by Tokyo. Savills says the increase in Tokyo was the sharpest quarterly rise recorded in any Asia Pacific city since the report was launched in 2020, and it expects upward pressure on costs to continue in the near term.

In EMEA, Dublin and Milan both saw notable increases. Occupier costs in Dublin rose by 4.8 percent due to higher rents and service charges alongside a slowdown in new development activity. Milan recorded a 3.5 percent increase, supported by rising rents and reduced landlord incentives.

North American occupier costs rose more modestly overall, although Midtown Manhattan and San Francisco outperformed the regional average. Costs in San Francisco increased by 2.4 percent, which Savills attributes partly to continued demand from AI firms seeking prime office space.

The report says the recovery in demand for premium space in New York has also altered the balance between landlords and occupiers. During the immediate post-pandemic period, landlords offered substantial incentives including extended rent-free periods to secure tenants. As demand has strengthened, these incentives have reduced and occupier costs have risen accordingly.

Savills says net effective occupier costs in Midtown Manhattan have increased by 28.7 percent since the first quarter of 2022.

Rick Schuham, CEO of Global Occupier Services at Savills, said demand for high quality office space remained strong across most major cities. “In a large number of locations landlords have now reduced incentives and occupiers have limited options to choose from, making it imperative they engage with the market early, define their requirements effectively, and ensure their intentions and options are clear,” he said.

The latest edition of the report also expands Savills’ coverage to include Dallas, Atlanta, Mexico City, Manila, Lagos, Johannesburg and Oslo.

Sarah Brooks, associate director in Savills World Research, said the additional cities reflect growing demand for prime office space in a wider range of business locations. “While these are all very different markets, generally they are beginning to see increased demand for prime space, as global occupiers increasingly strategise to cost-effectively access the best talent ahead of their competitors,” she said.