New York has displaced London as the world’s second most expensive city
to rent business and residential space for employees, behind Hong Kong
which retained top spot, while Singapore offers businesses locating in
the city the best value accommodation in relation to the size of its
economy.
In its latest World Cities Review report, real
estate advisor Savills updated its ‘total accommodation cost’ measure
of the top 10 world cities, and found that it has remained broadly
stable, falling an average of just -0.05 percent in the first half of
2013, but having risen in ‘old world’ cities and fallen in ‘new world
ones’.
This has made emerging and recently emerged markets
relatively more competitive again, with Sydney, Shanghai and Mumbai
offering the lowest total base business costs, with Mumbai costs around a
quarter of Hong Kong.
The costs of accommodating core
international business units in both prime financial and secondary
‘creative’ locations along with the associated residential rental
requirements of 14 households are taken into account in the ‘total
costs’ measure.
New York has risen from being the fifth most
expensive city at the beginning of 2010 to second by June 2013, having
seen total costs rise 36 percent from the end of 2009. London has
recovered strongly, witnessing a 17 percent rise since bottoming out in
2009 to sit in third place in the survey.
Savills has created a
‘value for money’ ranking, measuring accommodation costs against city
GDP per head which is taken as an indicator of the income potential for
businesses located there.
By this measure, Hong Kong, where
total accommodation costs are almost four times those of Mumbai,
actually looks three times cheaper than Mumbai, where locating an
international business might be viewed with regard to market volume and
labour availability rather than premium revenues. This makes real
estate in the Indian city look very fully valued, particularly as the
BRIC economies are slowing at the present time and rival economies are
emerging as sources of low-cost labour.
Singapore, where
unadjusted total accommodation costs are high in a new world context,
proves to be the cheapest city in relation to its GDP per head. Ranked
in this way, Singapore is less than half the cost of Hong Kong and
approaching five times cheaper than Mumbai.
Yolande Barnes,
Director of Savills world research, said: “Headline per square foot
office rents are a misleading indication of the total real estate costs
faced by relocating companies. The value of real estate is higher where
more corporate revenue can be generated.”
“In other words, it is
worth paying more to accommodate an executive team in Singapore with its
high GDP than in the low GDP Mumbai,” she added.
Andrew Batt, International Group Editor of
PropertyGuru Group, wrote this story. To contact him about this or other
stories email andrew@propertyguru.com.sg
Indonesia to tighten rules on home loans
Vietnam govt to make foreign property buying easier
Strong S’pore interest from developers and agents