The cost of occupying offices in the core Northern Powerhouse cities is rising faster than Central London, according to new research.
National commercial property consultancy Lambert Smith Hampton (LSH) examined the average cost of occupying a new build office compared to a 20-year old office building across 54 UK locations for its Total Office Costs Survey (TOCS).
It found the average cost of occupying both new build and 20-year-old office space across the North of England increased by three per cent in the 12 months to April 2018.
The average cost of a typical workstation across the core cities of Leeds, Liverpool, Manchester, Newcastle and Sheffield now stands 45 per cent below London’s Midtown district – narrowing from a peak of 53 per cent in 2016’s equivalent survey.
Sheffield saw the largest percentage increase in occupier costs for a new office building, rising by 5.4 per cent over the 12 months to April 2018, followed by Leeds (3.1 per cent), Newcastle (2.2 per cent), Manchester (1.1 per cent) and Liverpool (0.7 per cent).
Manchester saw the strongest growth in occupier costs for a 20-year old building, rising by 5.4 per cent, followed by Leeds (4.9 per cent), Sheffield (4.4 per cent), Liverpool (1.1 per cent) and Newcastle (one per cent).
Manchester is the most expensive location in the North for a second successive year, with average annual costs for a new build office of £73.92 per sq ft ft, followed by Leeds (£69.87), Newcastle (£65.44) and Sheffield (£63.81). Liverpool is the most cost-effective location at £56.17 per sq ft. London’s Midtown currently stands at £121.93 per sq ft.
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 from an all-time high in 2016. This reflects 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.”
Adam Varley, director of Office Advisory at LSH Leeds, said: “Despite the gap narrowing in percentage terms, Northern cities still offer a significant cost advantage to their Southern counterparts and once incentive packages are accounted for the North offers further financial benefits.
“Factor in the high cost of living in London, with recent research suggesting that that record numbers of people are leaving the Capital when they have children and want to put down roots, as well as the availability and costs of skilled staff, it’s only a matter of time before businesses look to relocate or expand their presence in the North in order to attract and retain the best talent.”
TOCS is the most definitive independent survey of its type, with cost data supplied by LSH and leading industry suppliers.