Sara K. James
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London knocks Hong Kong off top spot in most-expensive-cities ranking


Move over, Hong Kong. There’s a new top dog in high-price towns. London is now the costliest place for companies to locate staff, knocking the Asian city down into second place and handily beating New York, which ranks third, the real estate companySavills has found.

In the U.K. capital, businesses pay almost $121,000 in office and accommodation rent per year for each employee, according to the Savills World Research analysis, released Tuesday. That’s a almost twice as much as they’d pay in Sydney and three times as much as in Shanghai.

So what’s behind London’s rise? The strength of sterling GBPUSD +0.08%, mostly, say the report’s authors. The Savills study covers 2014 through June, and over the first six months of the year the pound gained slightly more than 3%.

Real-estate costs increased at the equivalent of 10.6% a year in the first six months of 2014, they noted, and this “was largely due to the U.K. pound’s recent appreciation against the U.S. dollar.”

The opposite effect — a weakening currency — helped drag Hong Kong down the list, as did falling residential rents, Savills said. The special administrative region of China had held the lead spot since the launch of the rankings in 2008. The silver lining? The downgrade should boost Hong Kong’s competitiveness as a friendly spot for company outposts.

“This year has seen much more modest real-estate price growth in nearly all our world cities, and some have shown small falls,” says Yolande Barnes, director of Savills World Research, in the report. “We expect this subdued trend to continue as investor interest and market activity shifts to second-tier cities.”