New research has revealed that London is the most expensive city globally for office refurbishments due to the demand for high-quality facilities and specialist skills.
The average high specification project in London costs £4,671 ($5,932) per square metre, which is four per cent higher than New York, the second most expensive city, and eight per cent more than Zurich, which ranks third, according to Turner & Townsend, as reported by .
London-based companies have been increasingly pressuring employees to return to work, while RSM estimates the current construction skills gap at 250,000. "In London we are seeing a perfect storm," said Nadia de Klerk, head of occupier and retail at Turner & Townsend.
"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," she added.
The flight to quality
One of the reasons for the high demand for office refurbishments in London 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 stipulate that rented commercial properties in England and Wales must 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 prioritised a 'retrofit first' approach for making office spaces environmentally sustainable, having approved an unprecedented number of retrofit planning applications in the past year. This initiative, combined with efforts by firms to enhance their workplaces to entice employees back to the office, has spurred a 'flight to quality.'
There's been robust demand for eco-friendly office buildings in the City, which is reflected in the uptake of such spaces this year, with new construction applications increasingly featuring state-of-the-art green features.
"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," said Klerk.
]Rental prices for these sought-after spaces in the capital have surged by double digits over the last 12 months and are projected to climb further come 2025.
