London tops global league table for office fit-out costs
The cost of fitting out high specification commercial space in London is higher than anywhere in the world, according to a new report. The research from Turner & Townsend also found that Birmingham, Manchester, Glasgow and Edinburgh had the highest commercial construction costs in the UK.
As the final stage of construction before an office is ready for a company to inhabit, fitting out is a transformative process that turns empty spaces into fully functional layouts. Fit-outs create entirely new and customised spaces, involving a complete outfitting of interiors, tailored to align with a company’s specific operational needs and aesthetic preferences – reflecting the business’s identity, while integrating both style and function.
According to professional services firm Turner & Townsend, London is now the world’s most expensive city to undertake this process – in a knock to the UK capital’s attractiveness as a business hub. Analysing fit-out costs across 50 global locations, the researchers found that in London the average high specification project cost is £4,671 per square meter. The second most expensive location is New York on £4,470, followed by Zurich on £4,299, and at San Francisco £4,293.
Since the Grenfell disaster, increased building safety regulations, and the ongoing shortage of specialist skills, such as Chartered Fire Engineers, are driving this cost spike in London, specifically in high-rise and high-profile buildings. At the same time, traditional design approaches may be contributing to slow and expensive fit-outs.
Turner & Townsend found that due to those skill shortages, fees for specialists in areas such as safety were around double the equivalent cost in New York. This meant that London topped the other cities, in spite of New York, San Francisco and Zurich having much more expensive basic costs of construction.
The findings align with Turner & Townsend’s International construction market survey 2024, which assessed overall construction costs globally. While New York, San Francisco and Zurich were the top three most expensive markets, London ranked only tenth in light of its basic cost of construction being significantly lower than the other three.
Nadia de Klerk, global head of occupier and retail, at Turner & Townsend, commented, “In London we are seeing a perfect storm. The gathering pace of return to office working, coupled with skilled trades shortages and high building material prices, have resulted in commercial fit-out costs being the world’s most expensive. Given these pressures, alongside other geopolitical headwinds, it’s more important than ever that real estate teams around the world arm themselves with data and insight. This is essential for horizon scanning, and evidence-backed decision making, not to mention accurate benchmarking of fit-out projects to inform investment.”
The new data also identifies the demand for specialist facilities and quality services as key factors helping drive up costs – with occupiers seeking the latest audio-visual technology, premium mechanical, engineering and plumbing (MEP), and more sustainable design and operation. And while this has seen a degree of offshoring space to fast-growing emerging economies, such as India, Mexico and Malaysia, the researchers also found there were opportunities for other UK hubs to attract new businesses.
With attractive links to skilled labour, and international trade and financial links, technology hubs Birmingham and Manchester offer much of what London has – but for a fraction of the price. Office fit-outs in Birmingham were £1,713 less expensive per square metre, while prices fell by £1,854 in Manchester. And in Edinburgh and Glasgow, fit-outs were almost £2,000 cheaper.
