A shift in economic growth from the West to emerging markets over the past decade has led to the emergence of new business hubs across the world.
Regions such as Asia, the Middle East and South America have seen rapid economic growth, coupled with improved infrastructure, and in some cases, lighter regulation. Multinational organizations have rushed to capitalize on this, increasing the number of people they hire in these countries and setting up new offices in emerging markets. For example, banks including HSBC and Barclays have said they will increase hiring in Asia, while cutting staff in developed markets. GE, for example, has moved the headquarters of its X-ray business to Beijing from the U.S.
The emergence of these new business centers has sometimes come at the expense of the traditional centers such as New York, Frankfurt and London. But it hasn't always been smooth. Dubai, which experienced huge investments in real estate over the past decade, faced a property bust in 2009.
We decided to look at the top business hubs in the world based on research by global real estate firm CB Richard Ellis, which surveyed 300 of the world's largest companies, including Fortune 500 firms and other non-listed entities, such as law firms. The ranking is based on what percentage of these companies have offices in these cities.
We've matched that with the cost of renting office space in the central business districts (CBDs) of these hubs from real estate firm Cushman & Wakefield. Office rent cost is measured in square meter per year.
The results might surprise you with some of the largest North American cities absent. So which cities are the world's most popular business hubs? Click ahead to find out.
By: Rajeshni Naidu-Ghelani(Posted: August 16, 2011)
Companies Present: 55.7 percent
Office Rental Cost: $1,093 per sq. meter
Paris, one of the world's major cultural centers, is one of only three Western European cities to make the list of the world's top 10 business centers. France comes in third among European countries with the most international companies present.
Paris, like its other Western counterparts, plays host to offices of many front-office business functions because of its advanced economy and high skills base. Professional services and the insurance sector have a large representation in Paris, while automobile and mining firms are the least represented. The city is home to French banking giant BNP Paribas and insurer AXA. In fact, the Paris region accounts for almost 30 percent of France's economy.
Rents for office space rose 9 percent in 2010, despite ongoing economic debt worries in France and the wider Euro region. That's because a lack of new supply pushed commercial rents higher.
Companies Present: 56.1 percent
Office Rental Cost: $524 per sq. meter
Dubai is the top business hub in the Middle East and African region, reflecting the success of its government's strategy to promote it as a regional center. The city has also benefited as a "safe haven" for foreign companies amid political unrest in the Arab world.
Dubai attracted more than 70 percent of the firms polled by CB Richard Ellis in the industrial goods and services sectors. Given its strategic location—halfway between Europe and Asia—it often serves as the head office for higher-level decision-making.
Incentives such as tax breaks and a more liberal attitude toward Western culture, such as women not having to cover their heads in public, have made Dubai a popular city for expatriate staff. The Dubai International Financial Centre, the firm running the emirate's tax-free business park, said 64 companies joined its free zone in the first half of 2011—an 8 percent increase from last year.
But, there are some government restrictions that make it difficult for international companies to operate in the local market. For example, businesses must be 51 percent owned by a citizen of the United Arab Emirates.
Dubai's property market has still not fully recovered from the Gulf state's property bust and debt crisis in 2009. In 2010, the Middle East and Africa were the only regions in the world that saw a continuing decline in office rental costs. Dubai saw rents go down by as much as 20 percent, as significant oversupply and high vacancy rates plagued the domestic market.
Companies Present: 59.6 percent
Office Rental Cost: $484 per sq. meter
Madrid is home to more than 75 percent of companies in the media, technology and telecommunications sector, about the same level as New York, giving Madrid equal bragging rights as a media capital. The city is also home to Telefonica—Europe's second-largest phone company.
Madrid is the third largest city in the European Union (EU) after London and Paris, and accounted for more than 12 percent of Spain's gross domestic product in 2009. The city has held up better than the rest of the country, which has been facing a property bust and debt crisis. Its unemployment rate was 4.5 percentage points lower than the national average of 21.3 percent in the first quarter of 2011. Office rental prices have suffered though, dropping 7 percent in 2010 due to low demand.
As the capital of the country, Madrid also benefits from Spain's popularity among foreign companies. In fact, Spain is among the top five countries in the world when it comes to attracting international companies. In all, Europe accounts for five of the top 10 nations in terms of hosting offices of the biggest international firms. A big draw for these companies is the size of the European consumer market and the ease with which companies in the EU can expand into neighboring countries.
Companies Present: 60.4 percent
Office Rental Cost: $735 per sq. meter
Beijing is one of the world's most heavily populated cities, with nearly 20 million residents. It's among five Asian cities that make the Top 10 list.
The city has a high concentration of mining, construction, and agricultural companies. Firms that have a high level of interaction with government agencies and state-owned companies, as well as those in highly regulated sectors such as energy and mining, tend to set up an office in China's political center.
Companies trying to access the growing local consumer markets also have a big presence in the city. Beijing's automobile sector has boomed in recent years, as China has become the world's largest car market by volume sales. German automaker Daimler opened a Mercedes-Benz design center in the city last month, while U.S. carmaker General Motors runs ventures with state auto groups SAIC Motor and FAW Group.
Beijing has been rapidly developing prime office space following a government push to develop the central business district. Office rents went up by a whopping 48 percent in 2010 because of increased domestic demand for high-quality office space and limited supply.
Companies Present: 60.7 percent
Office Rental Cost: $850 per sq. meter
Moscow's ranking as the sixth most popular business hub, and the second most popular in Europe, shows Russia's importance as an emerging market.
International firms find it difficult to do business in Russia without a domestic office, given high levels of bureaucracy and corruption, which is one reason why the city is so important for foreign companies. The fact the Moscow has better infrastructure and much higher levels of development than other large cities is another reason.
The city of 13 million has a high concentration of companies in the professional services sector given its highly skilled labor force and the fact that it often acts as a hub for operations in Central and Eastern Europe.
A redevelopment of Moscow's city center and the construction of the Moscow International Business Center have also helped cement the city's reputation as a hub.
Companies Present: 61.4 percent
Office Rental Cost: $812 per sq. meter
Shanghai is home to China's major financial institutions and mainland stock exchange, receiving significant capital inflows from Hong Kong.
Its position on the Yangtze River Delta also gives companies easy access to China's large manufacturing base, research and development, and back office operations in the region. These factors have resulted in a concentration of mining, construction, and commodity companies being based in the city. Many firms are starting to move west, however, to access cheaper labor.
Government initiatives to reduce economic disparity between cities has led to better infrastructure in other regions, with the plan that Shanghai and Beijing will likely become service-based cities and the inland markets will manage the manufacturing and distribution functions.
Shanghai has also becoming a key regional center in Asia. U.S. technology and manufacturing firm Honeywell moved its Singapore-based Asia-Pacific headquarters to the city in 2003, while German chip giant Infineon relocated its Hong Kong-based regional head office to Shanghai. As a result of growing demand, the city saw annual office rents rise by as much as 28 percent in 2010.
Companies Present: 63.2 percent
Office Rental Cost: $1,683 per sq. meter (West End) or $974 per sq. meter (City)
London has a long history as one of the world's top business centers, but in recent years a number of emerging markets have challenged its global ranking.
The city still attracts the highest number of international companies in Europe and dominates in the banking, financial, and professional services sectors worldwide. London has more than 480 overseas banks and is home to multinational heavyweights such as Rio Tinto. The city has the most international visitors in the world and accounts for over 20 percent of the U.K.'s economy.
Prime rents rebounded in London in 2010 after the global financial crisis. The city's West End saw annual rental growth top 27 percent due to limited supply of new construction. In comparison, rents in Ireland, Spain, and Greece fell by 19 percent, 7 percent, and 3 percent, respectively, in the same period.
Companies Present: 63.9 percent
Office Rental Cost: $20,469 per sq. meter
Tokyo is home to 47 Japanese Fortune 500 companies, including Honda, Sony, and Mitsubishi. The city is also headquarters to several of the world's largest investment banks and insurance companies. It is also known as one of the three command centers of the world economy, along with New York and London. Often at the top of the world's most expensive cities list, Tokyo has faced several setbacks in recent years with stagnant economic growth and natural disasters crippling the Japanese economy.
Tokyo slipped two places in 2010 to number three from being the most expensive office location in the world in 2009. Rents fell by more than 11 percent from the previous year as the city became a "tenants market" with vacancy rates rising and rental levels decreasing.
Companies Present: 67.5 percent
Office Rental Cost: $850 per sq. meter
Singapore is the highest ranked Asian city on the list. It has become a gateway for businesses and investors trying to access to world's fastest growing consumer markets in China.
Being in the same time zone as key Asian markets, such as mainland China, Hong Kong, Malaysia, and Indonesia, has been a major factor. The city is also home to two Fortune 500 companies—contract electronics manufacturer Flextronics and commodities trader Wilmar International.
The island nation's high-quality infrastructure, efficient administration, low taxes, as well as its busy shipping port and airport, have made it a top choice for many international companies and their expatriate employees.
The city is also home to many companies in the banking and financial services sector, and comes in fourth behind London, New York, and Hong Kong in terms of the number of financial services firms with offices there.
Office rents went up as much as 16 percent in 2010, with further increases expected this year as corporations expand and demand continues to rise.
Companies Present: 68.2 percent
Office Rental Cost: $2,297 per sq. meter
Hong Kong is the world's most popular city for international businesses, reflecting a shift in economic power to Asia in recent years.
Hong Kong holds a unique position because of its location and lack of foreign ownership restrictions, which allow companies to operate globally and still have access to a highly skilled and low-cost workforce. Cities such as Hong Kong and Singapore are seen as key business hubs, with access to the anticipated growth in surrounding emerging markets. Leading financial multinationals headquartered in Hong Kong include Morgan Stanley, Deutsche Bank, and Credit Suisse.
Annual rents for office space jumped 51 percent in 2010 from the year before, and high demand and limited supply is expected to push up rents by a further 15 to 20 percent this year.