Research article

The cost of real estate in Tech Cities across the globe

Rising on a global stage, tech centres such as Bengaluru, Chengdu and Buenos Aires are magnets for talent in their regions, supported by lower-cost real estate

We give real estate costs the lowest weighting in our index, because factors such as the availability of talent and quality of business environment matter more to the tech sector, but property still plays a role.

The cost and availability of suitable office space for scaling tech firms can make the difference between uninhibited growth and an opportunity missed. High residential accommodation costs can dissuade young talent from making a city home.

The affordability of property plays a role in the success of a Tech City, but other factors matter more

Savills World Research

Coworking costs

The expansion of coworking has gone hand in hand with the growth of the global tech sector. Coworking providers accounted for 13% and 13.5% of office market take-up in London and Dublin respectively in the first nine months of 2018. The sector is rising fast globally, but there is room for growth. Even in US markets such as Manhattan, total coworking space is estimated at just 2% of total office stock.

Private offices, offering the benefits of coworking (flexible leases, amenity provision), but with individual space for the occupier, is the coworking subsector rising fastest. We have measured costs for this type of space (see Figure 6).

Costs are highest in San Francisco where the supply/ demand imbalance is most acute. Some markets appear good value by comparison, notably Amsterdam, at $380 per month.

Figure 6

Figure 6 | Real estate costs rankings
Source: Savills World Research using Pitchbook
Sample metrics displayed. Our real estate costs ranking comprises of residential and commercial costs for tech occupiers and their employees.

Residential rents

Mainstream residential rents (see table) matter because they are a factor in where young talent decides to settle.

In San Francisco residential rents have grown faster than capital values in the last decade, in spite of rent controls, and are the highest of our Tech Cities at $720 per week. New York is more expensive for real estate costs overall, but renters have more affordable, but still commutable, options in the outer boroughs.

Several European centres compare favourably. Barcelona ($250 per week) and Berlin ($200 per week) offer relatively affordable rental accommodation. Our South American Tech Cities offer the lowest mainstream rents (sub $200 per week), but salaries are lower here too.

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