Most international comparisons of corporate real estate focus on a very narrow measure of cost, often just comparing the price per square metre or square foot of prime Grade A office space. This headline measure is inadequate because the reality of business premise occupation is that it varies greatly from city to city and from sector to sector. By no means will all businesses occupy the same types of space in the same locations within a city. In addition, the amount of space taken up by the same people will vary enormously from country to country. Office workers are more likely to be densely packed in Tokyo, for example, but use far greater space in Dubai.
In addition to commercial property costs, employers are also very interested in the cost of living accommodation for their workers. They will bear in mind that it may be easier to attract top talent to the best, most vibrant and exciting cities but that those cities also need to be liveable. Upward pressure on wages may be particularly strong in locations where the cost of residential accommodation is high.
The total Savills Executive Unit (SEU) measure of accommodation costs takes all of this into account, as well as the additional costs of occupying property, such as local taxes and rates.
Taking the lead
Hong Kong is the world’s most expensive city in which to locate employees, ranking ahead of London, which is virtually on a par with New York. These cities have spent the past two years vying for second place – some way below Hong Kong. Paris completes the list of the top four cities, where it costs more than US$100,000 a year per employee to rent living and working space.
The average live/work expenditure for all 12 world cities (see fig. 3) reveals that it now costs just under US$76,000 a year per employee to rent residential and office space in a world city. This cost has risen 21% since 2009, when most world city rental markets bottomed out. Hong Kong is 1.6 times more expensive than Singapore, which has almost exactly average world city rents, as do Tokyo, Moscow and Dubai. The cheapest cities in our survey are Rio and Mumbai, which are 60% cheaper than the average and less than a quarter of the price of Hong Kong.
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