Real estate: Office occupancy costs (CBD)

The cost of office space is one of the top expenses for outsourcing operations after personnel compensation expenses. Summarized below are annual costs per square foot for Class A office space in prime locations in central business districts (CBD) of key cities. The figures should be used with caution since occupancy costs can be highly variable within and across cities. High value add outsourcing providers may locate operations in Class A properties however, lower cost operations commonly opt for the suburbs and lower cost cities.

India provides a good example of the variability of real estate costs for outsourcing operations. Mumbai, the financial capital of India, has tremendously expensive real estate in the centeral business district. Gross occupancy costs for class A properties can be more than double that of downtown Manhattan. However, when you move to the suburbs of lower cost cities like Bangalore or Chennai, costs can drop by 70%-80%.

Data is primarily sourced from surveys from CB Richard Ellis and Colliers International. Figures are gross rents for Class A properties in prime locations and include all occupancy costs (e.g. rent, property taxes, and operating expenses). Class A properties command above average rents and are the most prestigious buildings in an area. The CB Richard Ellis survey is a semi-annual publication and was published in May 2009. The Colliers International survey is an annual publication and was published in March 2009. Figures displayed below are averages across key cities in each country.