London is a more expensive place to live in and to work compared with Sydney, Hong Kong and Mumbai. Savills 12 Cities Report finds that Sydney, Los Angeles and San Francisco offer best value.
The survey uses a Live/Work Index, so it measures the combined cost of residential and office rental per person per year. In both London and New York, the expensive nature of property means the value is driven down. In cities where real estate is cheaper, it’s easier to determine good value. The index identifies how much it costs for a business to accommodate an employee in a city, based on where they live as well as where they work.
According to Savills, London’s Live/Work averages $118, 425 for the first half of this year. The figure has drastically increased since 2008 because the cost of property in the city has rapidly increased. In comparison Hong Kong has seen costs rise just 0.4% in the same period. Mumbai has seen a 2.4% increase since 208 but the average cost of accommodating an employee there is $29, 088.
The Index figure is closely aligned to financial and economic recovery. In the US, for example, economic recovery and the growth of new avenues of business (like San Francisco’s creative and digital community) has seen rental rates for offices rise. Rental growth, according to the compilers of the report, say it is a sure sign of a city’s business growth and prosperity.
While Savills believe it is good for growth, what does expensive costs mean for business, especially those looking to set up in London?
It could be argued that expensive costs to accommodate employees could deter companies from setting up in the capital. If there are other international capital cities around the world, with a strong economy, excellent business landscape, financial hub and international transport connections, does it affect London’s competitiveness to set up a headquarters, or to hire new staff and grow within the city?
Savills says accommodation costs are only one part of the jigsaw when it comes to analysing affordability. As well as per head accommodation costs they have also taken into account a per capita GDP. London’s strong economy might be bad news for occupiers, but it shows how there’s been a return on investment for those who’ve spent money on real estate since the recession.
In London there needs to be more accommodation for offices as well as homes;The huge demand for office space is illustrative of the city’s popularity and demand. That is undoubtedly a good thing. Yet as someone who offers extended stay accommodation with many business clients, Clarendon recognises that there needs to be variety and affordability so that every level of business is serviced. Business needs choice.
London’s growth and economic buoyancy is a good for business. It elevates the reputation of the capital, encourages rents and it encourages people to move to the capital. And people mean money. Yet they need to be able to afford to live in the capital. London has to make people money, rather than just take it. London needs to remain competitive and if it prices itself out of the market it could cease to stay attractive to business.