Savills has released its tenth annual Live/Work Index revealing that while Dubai has become a cheaper location in which to accommodate a worker in the past decade, Dublin has climbed the ranks to become the most expensive city in Europe after London, largely driven by residential rent increases. 

The international real estate advisor says that New York has retained the title for the second consecutive year as the most expensive global city in terms of average cost of office space and residential accommodation per worker at $113,600 per year. In 2016, New York overtook London, which held the top spot between 2012 and 2015 but which has now slipped back into third place after Hong Kong*. San Francisco, 5th in the current Index, has been one of the biggest climbers in the past decade, having risen from 11th position in 2008, due to the exponential growth of Silicon Valley.

The average cost across the 34 cities surveyed in the 2017/18 Index is $47,500, according to Savills.

Top three cities unchanged:

• New York, Hong Kong and London remain the most expensive cities in which to rent office and residential space, all exceeding $95,000 per employee per annum.
• Tokyo, in fourth position ($82,100), saw costs rise as residential occupier demand and low office vacancy rates spurred rental growth in the city’s office markets.
• Buoyed by a booming tech sector, San Francisco has risen rapidly in Savills global Live/Work rankings. It currently stands at 5th, up from 11th in 2008. Office rents continue to rise, but have been offset by slowing residential rental growth (with falls at the top end) leaving costs down -0.1% overall.
• Rental growth in US cities in general has slowed, reflecting their position at the top of the rental cycle following several years of strong growth.

European cities rise:

• Euro-denominated cities are moving up Savills global Live/Work cost league. Fast-growing city economies are fuelling rent rises and a strengthening Euro has made these cities more expensive for occupiers outside the Euro-zone. 
• Live/work costs in Dublin, the next most expensive European city after London, rose by 19% to $61,100. In Amsterdam they were up 29.6% to $60,300. In both cities rapidly rising prime residential rents have driven up overall costs.

At the other end of the table, Berlin appears to still offer value compared to other top European centres (for now at least), ranked 23rd in this year’s league. Total costs are rising though, up 7.1% respectively in Euro terms. Take-up reached its highest levels since 2007 contributing to rising office rents.

Paul Tostevin, associate director in Savills World Research team, comments: “Looking back over the past 10 years it’s clear that some cities such as San Francisco have seen fairly steady increases in both residential and office costs as they have grown in popularity, while others such as Moscow, 5th out of 29 cities in 2013 versus 19th out of 34 cities today, have fluctuated in line with exchange rates and global socio-political events. Broadly speaking though European cities have been some of the biggest climbers, with the growth of Amsterdam and Dublin in particular demonstrating the increasing popularity of smaller locations which offer a good work/life balance with occupiers.”

Jeremy Bates, head of Savills World Occupier Services, adds: “While rents are obviously important to occupiers, attracting the right talent has a much greater impact on business success. With new generations of footloose workers being attracted to roles based on location, rather than company name, occupiers need to ensure they choose the right neighbourhood and working environment when relocating. While costs are rising in some European cities, many still offer good value, particularly when considered alongside the lifestyle they provide. The major global cities, meanwhile, don’t come cheap but in some markets office property costs are slowing given their position in the rental cycle.”

*Savills uses a core business unit measure, the Savills Executive Unit - a 7-person strong staff team representative of a start-up business, designed to be a comparable measure across all cities. For the live-work index we have measured costs for two teams, one based in a prime financial sector location, the other in a secondary/creative location to give a representative cross city costing. The Savills live-work index measures the annual per person cost of renting and occupying home and office space per employee (and their households) in key world cities, taking an average across the Savills Executive Unit.