London surpassed Hong Kong as the world’s most expensive city for companies to locate employees after rents climbed and the pound appreciated against the dollar.

London real estate costs, which combine residential and office rents, climbed 5.3 percent in dollar terms in the first half, according to a report from Savills Plc, a property brokerage based in the U.K. capital. Companies pay an average of $121,000 a year to employ someone in the city.

Rents are climbing, Savills said, and the strengthening pound has been a major contributor to London’s rise in the rankings. The pound has climbed about 1.8 percent against the dollar in a year.

“The vitality of central London locations are at risk as they become too expensive for the types of occupiers that made them attractive in the first place,” Yolande Barnes, a director at Savills, said in the report.

By contrast, falling rents and a weakening currency pushed Hong Kong to second place after five years at the top of the ranking, followed by New York and Paris. Hong Kong real estate costs declined 5.6 percent in the period, cutting the cost of an employee to $116,000 a year, according to the report.

New York real estate costs declined 1.7 percent. Companies pay an average of $107,782 per year to have an employee living and working in the city.

Topics London