March 11, 2013
A new report from property consultants Savills based on the total cost of setting up in business in the world’s major cities has today revealed that Hong Kong is the most expensive of the ten cities in which to locate, with London in second place and New York a close third. The total real estate cost of setting up business in all three cities is now almost three times that in the best priced world capitals, Shanghai and Mumbai. The report will be published in full on the 20th March as The World Cities Review and includes measures of headline rent, tax and other charges.
There can be significant differences between headline commercial rents and the total costs that a tenant pays. Headline rents alone make Hong Kong the priciest for financial sector locations, but London becomes the most expensive world city once all fees and taxes are included at £159 per square foot (£1,711 per square metre) when looking at a setup in the West of London. However London can also be one of the cheaper locations for a creative organisation or tech start-up.
Total real estate costs in most countries have remained roughly similar since the North Atlantic debt crisis struck, although the costs of financial company premises have fallen more. By contrast, creative businesses in Mumbai and New York have faced strong price growth of over 20 per cent, having grown from lower bases on the back of strong economies, while Singapore & Tokyo are as much as 20% cheaper than they were in 2008.
“In the intensely competitive global market for top talent, the cost, quality and desirability of a city lifestyle is an important unit of currency,” says Yolande Barnes, director of Savills world research. “Business location choices sometimes have as much to do with where the CEO wants to live as economic considerations, but the cost of residential and commercial accommodation for an international business team can have a significant impact on the bottom line. Our analysis shows the importance of looking beyond headline rents, or assuming that commercial and residential rents work in tandem.
“A location’s competitive pricing is by no means the only part played in its success – quality of life and business competitiveness will be key factors too – but the whole cost sum, and particularly the quality of business premises in a location can have an important impact on the human capital that is such an key part of the knowledge economy. Shanghai, Sydney and Singapore all have among the cheapest total costs of the ten world cities studied but each offers different competitive and business environments. Given their location within or close to the new world centres of wealth generation, they should be well-placed for inward investment from both financial and creative sector businesses.”