London is no longer the world’s most expensive city for companies to locate staff since there has been a slump in the sterling after Brexit, said luxury real estate firm Savills.

The British pound is down by around 11 percent since the start of the year and has declined by around 12 percent since the U.K. voted to leave the European Union (EU) on June 23. And hence compared to other leading world cities, the cost in U.S. dollar terms of housing and office rental in London has been sliced.

Savills said that with a drop of 11 percent from December 2015, the total live-work accommodation cost per employee in London stood at $100.141.30 in July 2016.

And hence for the first time in two-and-a-half years, London is not the most expensive city to locate staff.

“For the last two-and-a-half years … London has held top spot, reflecting the strength of its economy and high demand for space from a wide variety of occupiers, but the impact of currency falls post-EU referendum has made London very much more competitive on the world stage,” Savills said in a report very recently.

Having risen slightly since December 2015, at present, both New York and Hong Kong are currently more expensive to location to place staff. $114,009.57 and $100,984.26 respectively are the costs for these two financial hubs.

“Office-based businesses operating in major world cities will spend around one-third of their total operating costs on accommodation through a combination of commercial rents, paid directly to landlords, and demands on salaries created by the cost of employees’ living accommodation. Fluctuations in these costs will therefore have a significant bearing on how competitive a city is to employers,” Yolande Barnes, director at Savills World Research, said in the report.

Costs in dollar terms have jumped by over a fifth this year in Tokyo and this had made it the next most expensive city after London. Since the start of 2016, the close to 16 percent leap by the yen against the dollar is reflected by this.

“The swings in world currencies since Britain’s vote to leave the EU have helped to change an already dynamic range of market movements across cities to an extremely varied one. Tokyo saw the biggest increase in dollar terms as rent rises, particularly in prime residential and creative office sectors, where amplified by significant strengthening in the yen,” Savills said.

Savills added that the hit to occupier-demand in countries and companies closely affected by oil prices was the reason behind the falling cost of renting in Dubai, Lagos (in Nigeria) and Moscow.

Despite the fact that London was viewed as an English-speaking gateway to the rest of Europe, the appeal of locating in London may be dented for international businesses once the country quits the EU. However other factors like world-class schools and universities and cultural attractions would continue to be points of attraction for the city.

While issuing a warning on prime central London property, S&P Global Ratings said on Thursday that residential property was less likely to be hit by any dramatic drop in real estate valuations in the upcoming period.

“High-end and luxury apartments in central London were already experiencing some negative trends in the past few months. We would expect this situation to continue given that this segment relies more heavily on foreign investors, which we expect may be even more hesitant buyers now, despite the fall in sterling,” the ratings agency said in a report.

(Adapted from CNCB)

Categories: Economy & Finance, Uncategorized