London, UK the most expensive city in the world to live and work
The corporate real estate market in London is booming, with $31 billion of commercial property investment deals taking place across central London in 2014. According to a recent report from Savills, a global real estate services provider, London remains the world’s most expensive city for businesses to accommodate their employees. The Savills live/work index measures the annual cost per employee of renting and occupying living space and office space in twelve large cities around world. Businesses are now paying an average of $118,085 per employee in London, with the office space portion of that figure coming in at an average of just over $90 per square foot.
Why is London topping the employee cost list?
London is experiencing continued economic growth. It has stable financial markets, a robust legal system and a skilled workforce that draws from all of Europe’s talent, thanks to EU labor market flexibility. It is one of the world’s most well-connected cities and one that is truly international, with UK laws relatively relaxed on commercial property purchases by international firms (just under a third of investment deals in the London office sector in 2014 were from Asian companies – almost $10 billion). Coupled with a liquid and transparent property market and volatility in other asset classes, this has fueled the commercial property boom, with office space availability in central London now at an all time low.
Landmark commercial real estate sales to international investors
Adding to the continuing boom is the recent sale of several well-known office towers to international investors. One of the most iconic buildings in London aside from Big Ben, The Gherkin at 30 St Mary Axe, was sold to Joseph Safra, a Brazilian billionaire for £725million in 2014. Another, The Shard – the tallest tower in Europe and the highest building between London and the Ural mountains in Russia, is owned by the State of Qatar, which actually owns many of London’s landmark buildings, including Harrods, much of the Canary Wharf financial district and HSBC’s global headquarters. Battersea Power Station is owned by a Malaysian property company, and Lloyds of London by a Chinese insurance firm.
New York and Hong Kong closing in on London
Both Hong Kong and New York are listed at a cost per employee per year of over $100,000, with San Francisco the most expensive US city after New York ($111,811) at $85,598 per worker, placing it between Singapore ($71,872) and Paris ($97,198). San Francisco has actually outpaced the other 11 cities in the live/work index, with rent and commercial real estate expenses rising just over 55% since 2008.
US cities in line with world trends
Overall, the cost to a company of accommodating their workforce in the 12 cities measured by the report has fallen since 2014, partly due to the appreciation of the US dollar. The average for residential and commercial accommodation across the five US cities in the report (LA, Miami and Chicago, in addition to San Francisco and New York) measures in at $69,000 per person per year. This is just slightly lower than the average cost of the other seven world cities ($70,355).
The full live/work index report from Savills is available here