The cost of accommodation for expat employees working for multi nationals in London is more than double that of Sydney, Los Angeles or Chicago according to new research.
The average total cost of accommodation per worker, per year in 20 key cities around the world is US$56,855, the latest Live Work index from international real estate firm Savills shows.
The index, which measures the combined cost of residential and office rental per person per year across leading world class cities, found they vary from US$16,500 in Rio de Janeiro to US$112,800 in London. San Francisco saw the greatest price rise over 2015, up by 13%, compared to a 9% fall in Moscow and Rio de Janeiro.
Overall in second place is New York at US$111,300, then Hong Kong at US$103,200, then a considerable drop to Paris at US$78,200 and Tokyo at US$69,800. Sydney comes in at US$49,500, Los Angeles at US$48,600 and Chicago at US$44,700.
“The productivity of cities and their value to global businesses clearly has a pronounced effect on demand and hence rental costs. The highest ranking global cities, London and New York, are also the most expensive for businesses and workers to occupy. Arguably both are achieving a fair price in relation to their composite world city scores, but Hong Kong looks more fully valued,” said Yolande Barnes, head of Savills world research.
“However, world cities can become a victim of their own success when rents rise to the point where affordability becomes an issue. Rapid urbanisation demands supply elasticity, the test for the top Alpha cities is to supply new business quarters and residential neighbourhoods while capturing the characteristics that made the city attractive in the first place. Growth without social, economic or environmental loss is perhaps one of the biggest challenges facing our world cities today,” she explained.
The report points out that while some of the larger and most prominent world class cities struggle to replicate their most successful city fabric in new places, other cities are emerging into the global spotlight.
It says that real estate recovery has not been universal, but rather concentrated in the cities favoured by occupants and investors in the growing digital and creative economies. This means some relatively small cities, such as Berlin and Dublin are quickly moving into the realm of world class city status and competing with the giants in a new digital age, while San Francisco’s place in the top 10 now looks secure.
Furthermore, real estate growth has shifted back from east to west. From 2005 to 2011 new world BRIC cities, Brazil, Russia, India and China, countries such as Shanghai, Mumbai and Moscow as well as Hong Kong and Singapore, significantly outperformed London, New York, Paris, Tokyo and Sydney.
But in the years to 2015 this trend has reversed as economic growth and wealth creation has slowed in the new world, economic revival has driven real estate recovery in Europe and, most especially, in the United States.
“Looking forward, increasing the supply of high quality workspace will be crucial for emerging cities such as Rio de Janeiro, Mumbai and Lagos but this stock might not have to be international style office blocks if a more local low or mid-tech solution is more appropriate. The vast majority of workspaces across the globe in both emerged and emerging economies remain small scale, informal and local buildings rather than international architectural style, plate glass fronted offices,” said Barnes.
“The choice between a fine-grain city of mixed use neighbourhoods and grand masterplans of big blocks faces virtually every world city today and will make a huge difference to the way of life of citizens in their houses as well as work places,” she concluded.