Record High Reached for London Office Space Costs

Posted on 20 June, 2016 by Chris Grigorovsky

New research from Lambert Smith Hampton has revealed the gap between London and regional office costs has reached record highs, which is set to push occupiers out of the capital.

London

The firm’s ‘Total Office Cost Survey (TOCS) 2016’ found the main cause for the situation is London’s traditional office districts and emerging business locations having strong rental growth.

However, regionally, rental growth seems to be making a return in the core cities, with rents in locations such as these usually remaining lower in real terms than the last peak in 2008.

In London’s Midtown district, occupying a new-build development is currently at a new high of £127 per sq ft per annum and 78% more than ones in the ‘big six’ cities.

Commenting on the findings, Head of Research at Lambert Smith Hampton, Oliver du Sautoy, said: “The strong rates of rental growth witnessed in some locations will put further pressure on occupier costs moving forward.

“Business rates liabilities in these areas may also rise sharply when the 2017 revaluation comes into effect, and it is quite plausible that sharp rate rises will contribute to a dampening of rental growth.”

He goes on to say that relocating out of the capital is “arguably as compelling as it’s ever been”, concluding: “The relative cost parity that once existed between Central London’s fringe locations and the UK’s core cities has vanished.

“With occupiers having to look further afield than the capital to reduce costs, the UK’s core cities are well-placed to benefit.”




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