The cost of accommodating an employee in London is more than double that of Sydney, Los Angeles or Chicago, according to a new study which placed Mumbai 17th on a list of the world’s 20 most costly cities.
The study by real estate consultant Savills, released on Tuesday, said growth in real estate has shifted back from east to west: from 2005 to 2011, BRICS cities such as Shanghai, Mumbai, 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 slowed in the new world, economic revival has driven real estate recovery in Europe and, especially, in the US, the study said.
The three cities below Mumbai in the list of 20 are Berlin, Johannesburg and Rio de Janeiro. Mumbai is the only Indian city in the list.
Yolande Barnes, head of research at Savills, said: “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.”
At $112,800 per person, London is just ahead of New York, but more than double the cost of other Anglophone cities – Sydney, Los Angeles, Chicago – and 70% more expensive than rising “upstart” San Francisco, Savills’ latest “Live/Work Index” said.
The average total cost of accommodation per worker, per year in the 20 cities measured is $56,855, ranging from $16,500 in Rio de Janeiro to $112,800 in London, closely followed by New York and Hong Kong.
San Francisco saw the greatest price rise over 2015, up by 13%, compared to a 9% fall in Moscow and Rio de Janeiro, and is top of the table in A.T. Kearney’s Ranking for Global City “Future Potential”.
Barnes said: “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.”
She added: “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.”