Remote work may be here to stay, but most businesses still require a location that is conducive to growth and expansion. Ideally, the location offers ready access to a market, a talented pool of employees and policies that are favorable to business growth.
The Economist Intelligence Unit recently published a “Worldwide Cost of Living 2021” report that assessed data, including key factors that influence businesses on where to locate, from 173 countries worldwide. Not surprisingly, the list contains some cities long regarded as among the world’s most expensive. But likely owing to disruption of the pandemic, a few surprising cities emerged on the list as well. By proxy, these cities are not only among the most expensive to live, but also to run a business.
The EIU’s 2021 survey found the 10 costliest cities to be:
1. Tel Aviv, Israel
2. Paris (tied with Singapore for second place)
3. Singapore (tied with Paris for second place)
4. Zurich
5. Hong Kong
6. New York City
7. Geneva
8. Copenhagen, Denmark
9. Los Angeles
10. Osaka, Japan
Behind the rankings
Tel Aviv moved up four places to the position of the world’s No. 1 most-expensive city, largely due to the rising value of the shekel, accompanied by significant price hikes for about 10% of goods in the city due to the pandemic, the report’s authors write.
In calculating the Worldwide Cost of Living index, which is benchmarked against New York City, the report weighs prices for 10 categories of consumer goods and services used by global businesspeople. Across the board, transportation bottlenecks and supply chain issues were a primary source of rising costs in 2021, coupled with steeper prices for commodities and shifting consumer preferences.
Among the 10 categories of products and services used to derive the WCOL rankings, transportation saw the sharpest jumps, with index scores up 3.8 points on average, while the average per-liter price for petrol increased 21%. The inflation rate for prices tracked in the WCOL index across cities showed the fastest clip in five years, climbing by 3.5% year-over-year in local currencies, the report states.
Other findings
Tripoli, Libya, and Damascus, Syria were found to be the least-expensive cities in the world, owing to continuing political upheaval and economic challenges. Tehran, Iran, catapulted to position 29 in the ranking from 79 in 2020, precipitated by the climbing price of imports and continued goods shortages amid reimposed U.S. sanctions.
In the U.S., most cities either stayed put or fell in the rankings as the federal government stepped in with COVID-19 relief. This helped ensure the dollar remained stable and wasn’t subjected to currency volatility. However, New York City turned out to be the sixth most-costly city in the world and the U.S.’ frontrunner in terms of its cost of living.
What’s ahead
According to the report, if supply chain bottlenecks and lockdowns ease as anticipated, living costs in most major cities will stabilize near 2022’s end. Nevertheless, many businesses will continue to be ensnared by the need to be located in the presumably costly cities where all the action is. This may further the trend of companies that choose to base their headquarters in their native country and outsource operations. To reap the benefits of an outsourced economy, a business needs to research only which firms suit their requirements; the rest is taken care of by the outsourced firm.
