London crowned most expensive city for office refits after ‘perfect storm’ of costs
Demand for high-quality facilities and specialist skills has made London the most expensive city in the world to refit an office, according to new research.
The average high specification project in London costs £4,671 ($5,932) per square metre, four per cent higher than runner-up New York and eight per cent higher than third-place Zurich, Turner & Townsend has revealed.
Companies in London have been increasingly pressuring employees to return to work, while RSM has estimated the current construction skills gap at 250,000.
“In London we are seeing a perfect storm,” Nadia de Klerk, head of occupier and retail at Turner & Townsend, said.
“The gathering pace of return to office working, coupled with skilled trades shortages and high building material prices, has resulted in commercial fit-out costs being the world’s most expensive,” Klerk added.
The flight to quality
Part of the reason demand for office re-fits in London is so high is changing regulation.
Higher minimum energy efficiency requirements mean that a majority of office space in the City of London will require upgrades over the next three years.
Minimum energy efficiency standards (MEES) currently require that rented commercial properties in England and Wales have a minimum EPC rating of E. This will increase to a minimum rating of C in 2027 and B in 2030.
The City of London Corporation has adopted a retrofit first’ approach for sustainable offices, approving a record number of retrofit planning applications last year.
Together with employers’ attempts to sweeten the return-to-office mandate by making their workplaces more appealing, this drive for sustainable space has created a ‘flight to quality’.
Demand for sustainable office buildings has been a key driver of take-up in the City this year, and approved planning applications for new builds increasingly boast cutting-edge environmental credentials.
“The knock-on effect in the push for premium fit-out space is creating even greater demand for specialist skills, from MEP [mechanical, electrical and plumbing engineering] and sustainability to digital expertise, and this is likely to keep costs high,” Klerk said.