The cost of occupying office space in the main Northern cities is rising faster than in central London, according to Lambert Smith Hampton.
LSH’s Total Office Costs Survey found the average cost of occupying both new build and 20-year-old office space across the North of England increased by 3% in the 12 months to April 2018.
The average cost of a typical workstation across Leeds, Liverpool, Manchester, Newcastle and Sheffield now stands 45% below London’s Midtown district – narrowing from a peak of 53% in 2016’s equivalent survey.
Occupier costs for new build increased by 1.1% in Manchester and 0.7% in Liverpool over the period, while Manchester saw the strongest growth in occupier costs for a 20-year old building, rising by 5.4%, with the Liverpool figure being 1.1%.
Manchester was confirmed as the most expensive location in the North for a second successive year, with average annual costs of £7,194 per workstation, followed by Leeds at £6,614. Liverpool is the least expensive of the core cities, at £5,503 per workstation.
Oliver du Sautoy, head of research at LSH, said: “The survey reveals the gap in costs between the UK’s main regional cities and London has narrowed, reflecting the continuation of rental growth in the major regional cities, alongside stable rents in the capital.
“While the financial case for relocating out of London may be compelling, the figures may help to explain why the expected wave of inward investment into UK core regional cities has been modest over the past 12 months.”
Josh Levy, director of office agency at LSH in Manchester, said: “Despite the gap narrowing, Northern cities still offer a significant cost advantage to their Southern counterparts. Factor in the high cost of living in London and it’s only a matter of time before even more businesses look to relocate or expand their presence in the North in order to attract and retain the best talent.”
London’s West End remains the most expensive UK office location, with the annual cost for a new office in Mayfair at £18,142 per workstation.
Total office costs per sq ft – taking into account net effective rent, rates, annualised costs, hard and soft facilities management and management fees – was calculated at £73.92 per sq ft for Manchester’s new build offices, versus £69.95 per sq ft for its 20-year old office buildings.
In Liverpool those figures are £56.17 versus £53.89 and in Preston £53.53 versus £48.40.