Cities which are home to a top university are also likely to see a 58% premium in the capital values of their office stock, says Savills.
In analysis undertaken for Impacts, its global research programme, the international real estate advisor has found that office capital values in key global cities which have a QS Top 200 university are US$672 per ft2 on average, 58% higher than the US$425 per sq ft of those that do not.
The distribution of cities with higher capital values is strongly skewed to those that are also home to top ranked institutions, says Savills.
'While correlation isn’t always causation, the fact that the overwhelming majority of the world’s most valuable office markets are in cities which are also home to the best educational institutes is no coincidence,' commented Steve Lang, head of life science research at Savills. 'Businesses of all types need to be close to the best talent and much of that comes from these education institutions, so there’s an inherent and considerable value for occupiers to locate nearby, resulting in competition for best-in-class offices and laboratory space pushing up commercial property capital values. This causes a virtuous circle of creating ecosystems which students want to be part of, further supporting the university’s growth and performance in the league tables, and leading to more prime commercial space being delivered.'
Paul Tostevin, director of Savills World Research, added: 'Businesses in search of top talent have a balancing act to perform. The cost of hiring and retaining the best graduates takes on a different hue if you are seeking to base yourself in San Francisco, Silicon Valley or Boston – where the average salary of a scientist comfortably exceeds $100,000 – rather than Bengaluru, where it’s less than $10,000. Naturally, the most in-demand individuals will gravitate to cities with high-performing businesses and prestigious tech clusters that, in turn, push up office rents and capital values. This is good news for investors, but a challenge for small and growing companies that need to minimise their costs.'