Occupancy costs in London, when compared to the UK’s regional cities, have decreased from last year’s record highs, according to Lambert Smith Hampton’s Total Office Cost Survey.
The survey, which incorporates 22 different costs including rent, business rates and waste management, shows that costs across the ‘big six’ cities of Birmingham, Leeds, Bristol, Manchester, Edinburgh and Glasgow now stand 42% below London’s Midtown, as opposed to last year’s 44%.
Oliver du Sautoy, head of research at LSH, said: “While the softening in rental levels within some of London’s key submarkets has driven a slight narrowing of occupier costs compared with elsewhere, the cost appeal of the UK’s regional cities over London’s Midtown remains compelling.”
The gap has closed mainly due to lower occupancy costs in London, although cost increases in other parts of the UK also influenced the outcome.
In the capital, the most noticeable decrease in costs was observed in the West End core, where they fell by 9.6% year on year to £18,145 per desk. Lower rental prices, in addition to more generous incentive packages, were the main factor behind the fall.
However, du Sautoy argues that there are still significant cost advantages to relocating from the capital. “While the softening in rental levels within some of London’s key submarkets has driven a slight narrowing of occupier costs compared with elsewhere, the cost appeal of the UK’s regional cities over London’s Midtown remains compelling – prior to the last recession in 2008, the discount was only 35%, compared with 42% currently,” he says.
“High living costs in the capital could also make it increasingly hard for London-based companies to attract young workers”, he adds.
Aside from rental costs, Lambert Smith Hampton (LSH) also notes that the day-to-day costs of operating an office have risen over the past year, reflecting UK inflation.
As for the rates revaluation in April, LSH says this only “had a limited impact on overall occupancy costs”. Although rate costs fell in some markets in the regions, the transitional cap reduced the extent of the change.