London ranks as world’s second most expensive fit-out market

A new report by Turner & Townsend reveals that London is now the second most expensive city globally for office fit-outs.

Turner & Townsend fit out, Rabobank office space ©JackHobhouse

This is driven by a surge in demand for premium, amenity-rich Grade A office spaces and a limited supply.

While London's fit-out costs decreased by 1% in the past year, they remain high at $5,872 per m2 (€5,420 per m2).

Other major cities also rank high, with Dublin at 18th, Edinburgh and Glasgow tied at 21st, Birmingham at 22nd, and Manchester at 25th. While Edinburgh and Glasgow experienced a 12% increase in costs year-over-year, Manchester and Birmingham saw more modest rises of 2% and 3% respectively, aligning with inflation. London, surprisingly, experienced a 1% decrease in costs, although prices there have seen substantial increases in prior years.

The report, covering 58 cities, highlights how the evolving role of the office and the growth of AI are transforming the fit-out landscape. Businesses are seeking workspaces that are more than just desks, aiming to create "home from home" environments with high-quality amenities to attract employees. The integration of AI into office design, from smart climate control to digitally tracked services, further drives up costs.

New York has reclaimed the top spot as the most expensive market ($5,886 per m2), while Dublin saw a substantial 12% increase in costs. The report also notes a global shortage of Grade A office space, forcing businesses to choose between paying high prices for new, quality space, renovating existing facilities, or negotiating to stay in less suitable offices.

London's corporate office market is currently dominated by large-scale fit-out projects, as major international companies seek new, custom-designed spaces. Although the post-pandemic slowdown in development has ended, the market is now facing a shortage of new office stock, which is expected to last until the 2030s. This is especially evident in Canary Wharf, where numerous skyscrapers are undergoing extensive renovations to meet contemporary demands.

Nadia de Klerk, Global Sector sponsor and head of UK Occupier & Portfolio, said: “The Grade A capacity squeeze has intersected with a new world of heightened occupier demand and expectations. We’re seeing high-value requirements for amenities, welfare and highly-scored building standards in connectivity and sustainability – all contributing to ever-rising costs for high-spec fit-outs.”