Research article

All Change Since Brexit

The cost of living and work accommodation has changed in World cities and New York City now has the highest global occupier costs

New York


For the past two and a half years, London has had the dubious honour of being the most expensive world city to rent accommodation. This has reflected the strength of its economy and high demand for space from a wide variety of occupiers. Last December, New York rents were snapping at London’s heels, but now New York’s live-work accommodation costs are the highest of Savills World Cities, ahead of Hong Kong and well ahead of London.

Falling financial sector office rents are behind a 0.5% fall in London’s overall live-work costs in sterling terms but the impact of currency falls post Brexit has made London much more competitive on the world stage. Continued uncertainty surrounding the EU exit terms has depreciated sterling to levels not seen in 168 years. After collecting the rental data in June, the EU referendum vote further reduced London’s occupation costs dramatically. Live-work costs have fallen, in dollar terms, by 19% since December 2015 (see fig.1). This puts London’s costs much closer to those of Tokyo and Paris. Of the cities we track, only Lagos observed a larger deflation in rental costs over the same period, at -30%. Singapore, Dubai, Moscow and Shanghai saw smaller falls in their space costs, ranging from -2% to -9%.

Meanwhile, rents for both residential and office properties in New York rose between December and June 2016 while the greenback strengthened. Even though nominal office rental growth is slowing, overall accommodation costs rose by 2%. The annual cost of living and work space in New York is now $114,010 per employee. Hong Kong is now way ahead of London’s $90,857 at $100,996. The biggest cost growth in dollar terms was seen in Tokyo where a combination of the strong yen and nominal prices pushed them up by 21%.

Figure 1

FIGURE 1October 2016 Living and Working Space Costs


The swing in world currencies since Britain’s Brexit vote has helped change an already dynamic range of market movements across cities to an extremely varied one. The biggest increases in dollar costs have been in Tokyo where growing rents, particularly in prime residential and creative office sectors, have been amplified by significant strengthening in the yen.

Even greater amplification has been seen in Rio de Janeiro, where challenging economic conditions have damaged real estate occupier demand and rent levels but been accompanied, perhaps surprisingly, by strength in the real. This means live-work costs have fallen by -5% in local currency but increased by 14% in dollar terms.

At the other extreme, Lagos has seen a downward movement in office rents (-20%) and the effect of a falling currency (-35%). As oil prices have fallen, oil-dependent industries have withdrawn demand for accommodation, and the naira has fallen significantly. Amplification here significantly improves the affordability of accommodation in Lagos for dollar-denominated companies.


Further down the league table of costs, the European cities have shown mostly modest rental growth in local currencies – symptomatic of cyclical post- GFC recovery, but the strengthening of the euro since December has made them slightly more expensive in dollar terms. The exception is Dublin, with an overall live-work increase of 6% in euro terms, fuelled primarily by a big bounce in office rents from low post-GFC levels, and especially in the creative/tech sector. This compares to Berlin’s overall 3% rent rise in local currency and Paris’s 1%. Despite being small, Berlin and Dublin look very good value to business occupiers wanting to locate in a large, prosperous economic region. Annual accommodation costs are among the lowest in the ranking, comparable to Mumbai and Lagos.


Dubai, Lagos and Moscow have all seen rent falls in offices and residential accommodation due to falling occupier demand in economies closely affected by oil price and businesses related to oil. Moscow accommodation costs fell by 9% overall (financial office rents were down by 18%) while Dubai’s fell by 7%, mainly in the residential sector. Both real estate markets are denominated in US dollars or related currencies, so have not been affected by currency movements against the dollar.

Falling rents in prime residential and especially offices in Lagos have been amplified by weak currency but are helping make the city look more affordable for international occupiers.


We estimate that businesses operating in world cities will spend around one-third of their total operating costs on accommodation: a combination of commercial rents, paid directly to landlords, and demands on salaries created by the cost of employees’ living accommodation.

The British Council for Offices (BCO) estimate that, for most companies, office accommodation costs account for around 15% of their total costs, compared to 50% salary costs. In world cities, a large proportion of employees salaries (often between 25% to 33%) will be spent on residential accommodation, so this will have a significant bearing on how competitive a city is to employers.

Savills unique measurement of both residential and commercial property costs captures this overall cost of accommodation like-for-like to show the impact of real estate on businesses across world cities.

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