The yo-yo costs of office space across the globe received a new twist this week, as London’s West End overtook Hong Kong as the most expensive office space location in the world.
Commercial property agency DTZ reported that the cost per worker of leasing conventional office space in Hong Kong declined by 12%, dropping to an average rate of $22,190 (approx £14,000) per workstation per year. The reason behind the decline is said to be due to companies taking on cost-cutting measures by reducing their office space, or moving away from the expensive Central area for cheaper rental values.
In London’s West End, the report claims that companies now spend an average of $23,500 (approx £14,865) per workstation per year on conventional office leases. This is said to be three times the global average, and nearly twenty times more expensive than the cheapest location in the survey.
The expensive West End region includes the plush districts of Mayfair and St. James’s, which is the so-called hedge-fund heartland of Central London. The high-profile nature of this area also attracts large-scale multi-national companies and technology giants such as Google, Facebook, Skype and LinkedIn.
Commenting on the findings, Richard Howard, head of DTZ West End, said: “These figures are a tangible reflection of the fact that London is a highly attractive place to locate a business.”
Interestingly, the United States experienced a somewhat different outcome.
According to the report, office rents in the US took on a distinctly downward trend. The cost of office space fell in every US city during 2012 as organisations attempted to cut costs, and as the labour market remained sluggish.
Research suggests that this drop in US rates could be due to an increase in space efficiency and flexibility, as companies work to save money by using less space for each worker.
There are many different ways of cutting office space per person – and it’s not all down to hiring and firing. The traditional cubical farms of US office buildings are being speedily replaced by open-plan offices that are more cost and space-efficient. And many companies are now increasing their flexibility, by offering remote working or hot-desking methods. This effectively encourages staff to share desk space and take it in turns to work from home or from alternative locations during the week.
It remains to be seen what space-saving methods UK-based companies will trial in 2013 in order to cut costs, but we can expect to see more flexibility on the agenda which may potentially bring the cost of Central London office space back down over the next 12 months.