London Tops as costliest city for office renovations due to a convergence of expenses, dubbed as a "Perfect Storm."
London: The Pricey Hub for Office Refits
London stands as the costliest city worldwide for office refits, as per recent findings, surpassing New York and Zurich by a significant margin. The average high-end refit in London amounts to a whopping £4,671 ($5,932) per square metre.
Corporate pressure to bring employees back to physical workspaces and an estimated construction skills deficit of 250,000 have fueled this trend, as Nadia de Klerk, head of occupier and retail at Turner & Townsend, points out. A perfect storm of factors has led to commercial fit-out costs skyrocketing to record highs in the city.
The 'Quality Over Quantity' Shift
One of the reasons for the soaring demand for office refits in London is the evolution of regulations.
Stricter energy-efficiency requirements, particularly in the City of London, will necessitate upgrades for the majority of office spaces over the next three years. Minimum energy efficiency standards (MEES) currently mandate a minimum Energy Performance Certificate (EPC) rating of E for rented commercial properties in England and Wales. This is set to increase to a C rating in 2027 and a B rating in 2030.
The City of London Corporation emphasizes a 'retrofit first' approach for sustainable offices, approving an unprecedented number of retrofit planning applications last year. Employers’ efforts to make workspaces more appealing and the quest for sustainable space has sparked a 'flight to quality’.
High demand for sustainable office buildings has been instrumental in driving take-up in the City this year, with approved planning applications for new builds boasting cutting-edge environmental credentials. The ensuing demand for specialist skills, spanning mechanical, electrical, and plumbing engineering, sustainability, and digital expertise, further escalates costs.
Booming Rents for Premium Spaces
Fueled by this drive for premium fit-out space, rents for top-tier offices in London have seen double-digit growth in the past year and are projected to surge again by 2025. The scarcity of skilled labor and competition for expertise drive up the cost of services, making London an expensive city for office fit-outs compared to other major cities.
Sources:
- Turner & Townsend: New research reveals London as the most expensive city for office refits
- RSM: Construction skills gap estimated at 250,000, says RSM
- Cushman & Wakefield: In the picture: the evolution of central London office spaces
- Knight Frank: Tech, talent and values driving office demand
- JLL: London’s West End – the unrivaled choice for global brands
- The 'Quality Over Quantity' Shift in London's commercial sector is pushing property owners to make significant refits, as stricter energy-efficiency regulations necessitate office space upgrades to meet minimum Energy Performance Certificate (EPC) ratings.
- The quest for sustainable office spaces has resulted in a booming demand for properties with cutting-edge environmental credentials in London, driving rental costs for premium spaces to soar, as a result of the high demand for specialised skills required in mechanical, electrical, plumbing engineering, sustainability, and digital expertise.
- The ensuing demand for specialised skills, in conjunction with the corporate pressure to bring employees back to physical workplaces and an estimated construction skills deficit of 250,000, has contributed to the skyrocketing costs of office refits in London, solidifying its status as the most expensive city worldwide for such projects.
