Every cloud........ 5th August 2016

New York has unseated London as the world’s most expensive city in which to accommodate staff, due to a drop in the pound and weakening office rents in the capital in the wake of the Brexit vote.

London has held the top spot on Savills’ Live/Work Index for two and a half years due to the strength of its economy and high demand for space from a wide variety of occupiers.

However, the impact of currency falls since Britain’s decision to leave the EU has made the capital much more competitive on the world stage, reducing occupation costs in dollar terms by 11 per cent since the beginning of 2016.

It now costs a company $100,141 (£76,205) to employ one person in London per year, according to the index, which compares total housing and office rental costs. This takes into account a drop in financial sector office rents as well sterling currency movements.

In contrast, New York became 2% more expensive over the same period. The average cost of housing an employee - both at work and at home - will now set a company back £114,009 per year.

Hong Kong was just ahead of London’s $100,141 at $100,984.

The swings in world currencies since Britain’s vote to leave the EU have helped to change an already dynamic range of market movements across cities to an extremely varied one.

Tokyo saw the biggest increase in dollar terms as rent rises, particularly in prime residential and creative office sectors, were 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 that overall Live-work costs have fallen by 5% in local currency but increased by 14% in dollar terms.

European cities have shown mostly modest rental growth in local currencies but the strengthening of the euro since December has made them slightly more expensive in dollar terms.

The exception is Dublin which has seen an overall live-work increase of 6% in Euro terms, fuelled primarily by a big bounce in office rents from low post-global financial crisis levels, and especially in the creative/tech sector. This compares to a 3% rise in Berlin and 1% in Paris.

Despite their small size, both Berlin and Dublin look very good value to businesses looking to locate within a large and prosperous economic region.  

Yolande Barnes, director, Savills world research said: “Office-based businesses operating in major world cities will spend around one-third of their total operating costs on accommodation through a combination of commercial rents, paid directly to landlords, and demands on salaries created by the cost of employees’ living accommodation. Fluctuations in these costs will therefore have a significant bearing on how competitive a city is to employers."