The Places Where It Costs the Most To Launch a Startup

It is not a coincidence that the most expensive places to launch a startup are also those with the greatest concentration of tech talent and access to venture funding.

Real estate may be a rounding error for financiers, but not for entrepreneurs. The question is whether, at some point, this becomes a limiting factor for innovation. JL

Alex Gray reports for The World Economic Forum:

The cost of leasing and fitting out 600 square feet of office space in the world’s leading cities would cost US$66,706 per year  in London— the highest in the world. The second most expensive place to launch a start-up is Brooklyn, at $62,736, followed by San Francisco at $61,680. Unless prices stabilize, there is a risk that some tech hubs will stop growing:

Costs for entrepreneurs wanting to launch a start-up are highest in London. That’s according to a new report by Knight Frank.

The UK real estate agent looked at the cost of leasing and fitting out 600 square feet (183 square metres) of office space in the tech and creative districts of the world’s leading cities. The size represents enough work space for a budding business of four employees, with a small conference room.

In London, this would cost US$66,706 per year — the highest of any creative district in the world. The second most expensive place to launch a start-up is Brooklyn, New York, at $62,736, followed by San Francisco at $61,680.

In fact, four of the top 10 most expensive cities are in the United States, with Boston in fifth place with $50,700 per 600sqft and Los Angeles in seventh with $47,124. In Europe, Paris and Dublin join London in the top 10 priciest locations, with Paris in fourth place at $57,426 and Dublin in sixth at $47,345.

The most expensive cities in Asia were Hong Kong in eighth place, where leasing 600sqft of space would cost $40,488; Beijing, in ninth, would involve an outlay of $39,090 and Singapore, in tenth, $39,088.

Start-ups are a key part of the innovation economy in areas that are struggling with slow growth. While about two thirds of small businesses don’t make it past 10 years, according to US figures, those that take off can change the way we live, from Uber to AirBnB.

Start-ups tend to gravitate to areas where other start-ups already exist, along with the venture capital firms that invest in them.

Affordable workspace

The authors of the report warn that, unless prices stabilize or decrease, there is a risk that some of the tech hubs will stop growing:

“London needs to be more affordable for tech firms if it wants a home-grown Google or Twitter.”