The high costs associated with accommodating staff in London will lead to a trend over the next decade of office occupiers moving away from the capital to the major cities around the UK. This is according to the 2016 edition of property consultancy Lambert Smith Hampton’s annual Office Market Report, which highlights the significant and growing difference in premises, staff and housing costs between Central London and the UK’s other key cities. For cities such as Bristol, Manchester and Birmingham, staff and premises costs (including rent, business rates, day-to-day running costs etc) for a new-build office collectively amount to just over £50,000 per workstation. Measured on the same basis, a workstation in London’s Midtown area carries an annual cost of well over £80,000. In practice, this means that the overall cost of occupying a new-build office in a location such as Bristol for 500 staff stands at £27m per annum; in Midtown, the total cost would be over £13m higher each year.

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London has reached the highest level of commercial construction since 2008, with activity totalling £7.4 billion. According to JLL and Glenigan’s latest UK Commercial Construction Index the level of speculative office development under construction in Central London totalled 8.3 million sq ft at the end of Q1 2016, well ahead of the long term average (5 million sq ft) indicating that developers are continuing to respond to London’s burgeoning requirements for new office floor space. In the West End office market alone, construction started speculatively on nine schemes in the first quarter of this year totalling 596,997 sq ft; the highest level of commencements since the end of 2014. The largest starts were at Brunel, W2 at 241,000 sq ft, which is scheduled to complete in 2019 and The Foundry, W8, a refurbishment planned to complete by the end of this year totalling 110,000 sq ft.

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Hong Kong is the world’s most expensive office location, followed by London, Beijing and New York.This is according to JLL’s Premium Office Rent Tracker, which compares like-for-like occupation costs across 24 cities around the world. This ranks Established World Cities such as New York and London, Emerging World Cities like Shanghai, Dubai and Mumbai, and New World Cities such as San Francisco, Boston and Toronto. The latest research shows that six of the top ten most expensive cities for office rentals are in Asia; with Hong Kong the world’s costliest office rental market on a net basis as well as including added costs such as service charges and property tax. The tracker found continued demand prime office space, despite a rise in economic uncertainty; while across the global cities, the technology, media and telecommunications sectors are moving into premium office space – previously dominated by the finance and professional services sector.

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