Brexit may already being paying dividends for London – provided that the goal of the historic decision to leave the European Union was to make the UK’s capital look cheaper than New York and Hong Kong.
After sitting atop the world rankings for the most expensive real estate costs for more than two years, London is now cheaper than America’s biggest commercial hub and less expensive than Hong Kong, which ranked second in the rankings recently compiled by Savills.
Thanks to a weaker pound and other factors, the price in US dollar terms of occupying office and residential space in London has slid 11 percent in the last year according to the agency’s research, bringing the total cost of providing an office and a home for an employee down to $100,141 per year by Savills’ estimates.
New York, HK and Tokyo Continue to Climb
In New York the same costs have risen by two percent since 2015, making the total tab for accommodating an employee $114,009 per year. In Hong Kong, which remains the most expensive city in Asia, providing space for a single staffer now costs $100,984 – up one percent since last year.
In Asia, where a total of four cities ranked among Savills’ top 20 most expensive locations, Tokyo rated as the second most expensive place to rent space with costs estimated at $85,331 per year – a full 25 percent less than New York. The Japanese capital was the fourth most expensive location globally.
“Office-based businesses operating in major world cities will spend around one-third of their total operating costs on accommodation through a combination of commercial rents, paid directly to landlords, and demands on salaries created by the cost of employees’ living accommodation,” said Yolande Barnes, director, Savills world research, in explaining the importance of accommodation costs to businesses globally. “Fluctuations in these costs will therefore have a significant bearing on how competitive a city is to employers.”
Although office rents and housing costs have been dropping in Singapore, the city still came in third in Asia and seventh worldwide, according to Savills, with combined annual accommodation costs of $61,335 per employee.
Shanghai Lands in Top 20 Globally
In mainland China, Shanghai was the only city to make the top 20 – coming in 17th on Savills’ ranking. The Chinese commercial hub’s estimated annual accommodation costs of $42,577 per year were just 37 percent of the cost in New York, and 42 percent of the fees that would be incurred for the same space in Hong Kong.
The figures were compiled in Savills Live-Work Index which compares total housing and office rental costs on a per capita basis in leading world cities. The real estate advisory firm, which makes its home in London, indicated that the city’s lower costs this year were driven not only be currency fluctuations, but also by weakening office rents in the finance industry. In New York, rents for both residential and office properties rose slightly in the early part of 2016, although the agency noted that growth in rental rates is slowing.
Currency changes also played a major role in Tokyo seeing the biggest increase in dollar terms as rent rises, particularly in prime residential and creative office sectors, were amplified by significant strengthening in the yen.