London’s West End remains the world’s most expensive location for office space at $29,000USD per workstation which is now nearly a third more expensive than second-placed New York, according to DTZ’s annual Global Office Thermometer.
The 18th annual edition of the report, which analyses 133 cities, shows that across the globe international occupiers are generally benefitting from significant drops in office costs. The annual USD cost of a workstation fell 3.9% globally on average in 2014. An appreciating US dollar, weak economic growth in Europe, and significant new supply in emerging markets combined to erode costs across many global markets. In addition, occupiers are using space more intensively in some cities, thereby reducing the average cost of a workstation. The report further reveals that workstation costs, measured in local currencies, showed only a modest rise overall.
Asia Pacific saw the fastest decline in USD workstation occupancy costs with an 8.3% decrease. Europe wasn’t far behind with an average decline of 7.8%. Workstation occupancy costs in North America and North Asia increased by 4.8% and 2.5%, respectively.
On a city level Moscow saw the sharpest fall in USD workstation occupancy costs in 2014, falling by a third on a USD basis. Other Eastern European cities including Bucharest (25%), Bratislava (23%) and Prague (21%) also posted sharp falls.
In contrast to this global trend, London’s West End saw workstation costs rise sharply. At $29,000 per workstation, it is 11 times more expensive than the cheapest European city Lisbon. Dublin registered the fastest increase in workstation occupancy costs in Europe with a rise of 13% in 2014 with London just behind on 11%, although Dublin remains significantly cheaper than London.
Some of the sharpest increases were in Middle East & Africa markets. Abu Dhabi saw the fastest increase in occupancy costs of any city in our global ranking in 2014, increasing by 36% on a USD basis. Other Middle East markets also saw some of the fastest increases notably Jeddah (20%) and Riyadh (11%). Similarly, occupancy costs in Lagos increased 8%.
Dublin posted the fastest increase (13%) in Europe, echoing the turnaround in the Irish economy. London (West End) witnessed the second fastest increase (12%).
Richard Yorke, Head of Global Occupier Research, and report author, said: “the appreciation of the US dollar has had a significant impact on the relative affordability of global cities. Nevertheless, our analysis of workstation costs in local currency terms also demonstrates the dampening impact of economic weakness in Europe. Similarly, the glut of new supply in some emerging markets is eroding workstation occupancy costs. In addition occupiers are using space more intensively, especially in expensive cities such as New York.”
James Maddock, Head of Global Occupier Services in EMEA, added: “London’s West End continues to power ahead as the most expensive city on the planet to have a desk and there are no signs that this will slow in the near future. The lure of London remains strong for occupiers who see the value of having space in one of the world’s major financial and business centres. It will be interesting to see the debate around the proposed EU referendum and what this means for London’s position as a destination of choice for many of the world’s major corporations.”
Within the UK’s regional cities, Edinburgh remains the most expensive although is 3.5 times cheaper than London. Costs per workstation have accelerated by 8% year on year as rising city centre rents begin to take effect.
Rob Yates, Director, Office Agency at DTZ in Manchester comments: “Against the backdrop of ever-increasing occupational costs within the capital, there is increasing evidence of inward migration into Manchester with some occupiers in the city of London showing particular interest in the UK regions.
“The cost of work stations within Manchester appears to be relatively stable in comparison with London, the next phase of development within Manchester city centre will deliver unprecedented levels of quality that are on a par with space currently available in London. Furthermore modern working practices are resulting in more efficient use of space thereby allowing occupiers to acquire better quality space than the current demise without necessarily increasingly the spend on property as a whole.
“From a Manchester perspective it is also encouraging to note that the city centre market is increasingly competitive when compared with the other regional UK cities and also competing locations across EMEA. Expansion of established sectors such as the professions and finance is expected over the short term together with further inward migration from the legal and insurance sectors, all of which is made possible by the regions strong demographic profile and breadth of universities that are delivering a broad range of skills into the employment market.”
The report concludes that international occupiers will continue to benefit from ebbing cost pressures in numerous office markets. Overall global workstation occupancy costs are expected to increase on average by just 0.5% per year over the next two years, on a local currency basis. Occupiers in North America will enjoy an annual 1% cut in workstation occupancy costs in 2015 and 2016. Conversely, Asia Pacific is expected to post the strongest average growth of 1.7%. Greater China, however, costs are likely to remain unchanged. Similarly, EMEA cost increases are set to average just 0.8%.