For any company worth its salt to compete successfully, it must think globally.
Yet while the “why global” is self-evident, the “where global” is a far more provocative question. When companies begin evaluating potential expansion cities, they must think in terms of specifics. For instance, an international airline would only consider English-speaking markets to locate its call center, even though it would benefit from reduced costs in other areas.
For most companies there are five categories that impact the success of an office.
The first is looking at the general business environment. This includes business costs and regulations, corporate tax rates, investment flows, research and development costs and linkages with other cities. New York, Singapore, London and Tel Aviv regularly rank at the top of this category, but for different reasons. New York boasts a high degree of investment flow particularly in the venture capital arena, Singapore features lower cost to occupiers in terms of compensation and taxation, London combines a fluid market with the greatest airport linkage and Tel Aviv is a global center of innovation and R&D.
Next up is looking to the technology environment. This is an increasingly crucial category that includes broadband speed, IT skills, number of Internet users, data transfer costs and mobile broadband reach. Hong Kong, Stockholm and Tel Aviv rank high given their broadband speeds, serious Internet infrastructure investment supported by and often financed by the government and prevalence of a skilled, educated tech workforce. Europe tends to lag in this category. For instance, Stockholm boasts an average broadband speed of 41 Mbps and London and Berlin have a pathetic 27 Mpbs—compared to 105 Mpbs in Singapore.
The quality of life category incorporates costs to those living in those cities (living accommodations, transportation), the standards of the job market and the local environment (working hours, crime, pollution) and city culture (restaurants, theaters, bars). Smaller cities tend to score higher in this category with Austin taking the top spot. Dublin also features prominently, due to the low cost of real estate, youthful population and vibrant nightlife. Berlin and San Francisco are notable for the prominence of cafés, cultural appeal and active art scenes. Conversely, Seoul ranks very low, reflecting demanding work hours, few foreigners and long commuting time.
Yet without a deep talent pool to recruit from, companies wouldn’t be able to function—the next category to pay attention to. The number and quality of universities as well as student population; the ability for cities to attract non-domestic talent; ease of immigration and dominance of English are all crucial. Median age as well as the millennial-to-baby boomer ratio is another variable for all companies, but of particular significance for tech and startup companies. Austin again takes the top spot in this category, followed closely by Tel Aviv, given their prominent centers of education and youthful and fast-growing population. Not surprisingly, London rounds out the top three, reflecting its ability to attract highly educated, non-London-taught talent from the rest of the U.K. and around the world.
And perhaps most obviously, property costs directly impact the fiscal ability and potential size of a company’s local office (both in terms of office space as well as residential accommodations.) Mumbai outranks the rest of the major cities in affordability, with New York, Singapore, London and Hong Kong registering as most expensive.
Overall, understanding the cultural and economic undercurrents of a locale prior to committing to a lease is critical to maximizing the potential for a successful outcome.
Gabe Marans is a managing director with Savills Studley.