European Cities 2017

European Cities
European Cities

13 March 2017, by Yolande Barnes

Prospects remain strong for Europe’s major cities

Key findings

European cities have many of the characteristics of highly successful world cities that make them very attractive to workers looking for ‘urban buzz’ and a high quality city lifestyle. Their authentic environments, varied cultural experience and high quality of living makes the European cities in this study attractive not only to employees but also to employers.

 

New digital industries disrupt working practices and are growing at a faster rate than conventional finance and business services. Companies are searching globally for the Human Resources they need to win in this environment. This means that companies’ location choices will increasingly be made by the HR rather than premises departments. The questions they will ask are “which cities will help attract human capital?” rather than “where will property costs help save financial capital?”

Europe does contain some of the world’s global powerhouses: the top ranking cities which continue to attract people as well as global investment. Often, they act as hubs to wider, dispersed city networks. They are unlikely to lose this status in the foreseeable future and are adapting well to the digital age. London, Paris and Madrid now employ more people in their information and communication sectors than in their financial and insurance sectors.

London and Paris are the two most global cities in Europe and accommodation costs in these cities reflect that success. Large workforces result in high demand for space in the city which pushes up rents and land values in old cities where space is limited.

There is a big fall-off in annual accommodation costs per worker to the next tier of European cities. Milan, Dublin, Amsterdam, Moscow and Brussels are around half the cost of London at present.

The cheapest cities in Europe in which to accommodate staff are Warsaw, Berlin. Frankfurt, Madrid and Stockholm. Warsaw is just over a quarter of the cost of London.

In some cities, this expense ranking is likely to change. Workspace rents are forecast to rise over the next year in Amsterdam, Dublin, Paris, Madrid, Milan and Stockholm. They are broadly stable in Brussels, Frankfurt, London and Warsaw, giving occupiers more certainty on real estate costs.

Where real estate costs are scrutinised, it is becoming as important to look at residential affordability as well as commercial property costs. Young creative workers are increasingly attracted to good, small cities offering cheaper accommodation as they are priced out of the big global financial centres. This is part of the reason why some very small European cities like Berlin, Dublin and Amsterdam are hugely successful and punching above their weight economically. Their worldwide fame belies their size.

Brexit has raised questions on London’s future as a financial centre and speculation is rife as to which European city might win London’s business. The evidence of this report suggests that no single city will take London’s crown but rather the EU passporting functions of many institutions will be dispersed throughout Europe to a variety of cities for different reasons.

Some small cities, especially those in which it is easy for multinationals to do business, those with favourable tax regimes and strong English language capabilities could do well in attracting global companies but few of these cities have the stock capacity to accommodate many large relocations from London – or elsewhere, especially in the short term. Some cities which larger levels of office supply may find their corporate and personal tax regimes discourage some companies.

Taking a combination of measures into account, London still stands out as the most attractive European city for the finance sector. We think it will continue to serve as a global finance centre but in partnership with some smaller European cities for passporting functions.

Overall, there are good reasons to expect further growth in both the economies and real estate markets of many European cities. Often the strength of the city will buck the trend of the country in which it sits so national comparisons are less useful than city comparisons.

The strength of occupier markets should continue to attract global investment in many European cities and to start attracting it in others. The attractiveness of these cities to investors is important for occupiers in the long run as it will determine whether they can find sufficient workspace of the right type in the right place and whether housing is affordable for their key workers. The economic and demographic strength of most of the European cities in this report is such that both occupier and investor demand should be assured.

FIGURE 1

Occupier guide to European cities at a glance

 
Figure 1

Source: Savills World Research

Articles from European Cities 2017

European cities

13 March 2017

European cities

Europe’s high quality city centres are a big draw for companies seeking workspace

The economics of European cities

European cities are economic powerhouses that buck the trend of national economics

Job creation in European cities

Wealth may have been created by finance industries, but tech is often growing faster and is more important for job creation in European cities

The global powerhouses

13 March 2017

The global powerhouses

Can London, Paris, Moscow and Madrid retain their world city status?

Property costs in Europe

13 March 2017

Property costs in Europe

The real estate costs of a city have to be weighed against the productivity of that city for any organisation. Residential real estate may cost a company more overall than workspace

Occupier futures

13 March 2017

Occupier futures

Where a city is placed within the rental cycle is an important consideration for occupiers

The urban accelerators

13 March 2017

The urban accelerators

Berlin, Dublin, Stockholm and Milan – mid-size but heavyweight attractors of talent

A new era for finance

13 March 2017

A new era for finance

Does the post-crisis decline of traditional banking & investment spell the end for Europe’s finance centres?

The contenders

13 March 2017

The contenders

Amsterdam, Brussels, Frankfurt and Warsaw all possess the potential for major growth in position and status

Corporate tax costs in Europe

The variety of corporate, personal and social security costs in Europe will have a greater impact on organisations in different cities than real estate costs

And Europe

Which European city stands to gain London’s financial crown as Brexit looms?

 
 

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Key contacts

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899

 

Matthew Fitzgerald

Matthew Fitzgerald

Director
WOS - Tenant Rep

Savills Margaret Street

+44 (0) 207 299 3082

 

Mark Ridley

Mark Ridley

Chief Executive Officer
Savills UK & Europe

Savills Margaret Street

+44 (0) 20 7499 8644

 

Paul Tostevin

Paul Tostevin

Associate Director
World Research

Savills Margaret Street

+44 (0) 20 7016 3883