New York still a bargain in global office market.

Midtown Manhattan office space is a bargain versus its international competitors.

New York is only the fourth most expensive city in the world, behind London, Paris, and Tokyo, according to a survey by Cushman & Wakefield, Inc., the world's largest privately held real estate services firm.

NY Midtown retains its 4th position with rents for the best space increasing by just over two percent. With the vacancy rate for prime space approaching 10 percent in 2005, the Midtown market is expected to see further increases this year, as the result of a return in demand for large blocks of space.

"New York is the financial and communications capital of the world, and it remains a inexpensive alternative on the world stage," said Bruce Mosler, president and chief executive officer of Cushman & Wakefield. "The world economic recovery has resulted in rent growth in many markets around the world."

The 2005 edition of Cushman & Wakefield's survey, Business Space Across the World, ranks the most expensive locations for occupying office space in 47 of the world's leading countries. At year end 2004, office rents increased or were stable in local currency terms in two-thirds of the 210 locations monitored, compared with last year's 50 percent.

Hong Kong showed the most improvement in the rankings, rising 12 places to take the No. 5 slot. The cost of occupying one square foot of office space in the Central District of the Chinese city reached the equivalent of $81.

Hong Kong improved its position as a result of rents rocketing 109 percent in local currency terms last year. Rents are the biggest part of occupancy costs.

Michael Thompson, Cushman & Wakefield's chief executive officer in Asia Pacific, comments: "Banks and other financial institutions have been particularly active in the Hong Kong market, taking the opportunity of relatively low rents to upgrade to better-quality office space. But we must remember that Hong Kong is traditionally a volatile market, and rents are still 42 percent below their 1997 peak. For 2005, we forecast that rental prices will continue to grow, but at a slower rate."

In the ranking, London retains its No 1 position, with Paris in second place. The cost of occupying one square foot of office space in London's Mayfair district is $199 a year, compared with $120 in Paris' central business district, a gap of 66 percent, which puts London well into the lead.

"The report shows that the revival of the world's economies is finally filtering through to the top-end of the office real estate sector, with increased demand for modern space in the right location driving up occupancy costs," says Elaine Rossall, Cushman & Wakefield's Head of Business Space Research.

"Further evidence is also emerging of a 'dual' market, as secondary properties, which don't match the needs of the modern office tenant, look set to remain in oversupply for some time."

About the overall affect of business sentiment on office occupancy decisions, Ms. Rossall comments: "The view out there is one of cautious optimism. The business confidence shown by the financial sectors and certain professional services is yet to be mirrored to the same extent by multinational corporations; a sense of uncertainty still pervades-whether over the price of oil, the weakness of the US dollar or a stalling in export demand."

Looking ahead, Ms. Rossall says: "The cost of occupying top-quality office space in the world's key locations will continue to rise this year as a shortage of prime office space is coupled with a steady increase in demand. Much of this demand is being fuelled by forward-looking tenants looking to cut costs and increase productivity through changing or upgrading their office space."