The gap between office costs in London and the West Midlands has reached a new high, research by national property consultancy Lambert Smith Hampton (LSH) has revealed.
As the LSH Total Office Cost Survey (TOCS) 2016 reveals the disparity, Alex Tross, head of office agency at LSH Birmingham, said England’s second city is now more able to attract major investment after years of infrastructure improvements.
The research, published by LSH, showed that Birmingham is 44% cheaper than London and this disparity is expected to encourage increasing numbers of occupiers to look favourably at the West Midlands, he said.
TOCS 2016 shows that the cost of occupying a new-build development in London’s Midtown district now stands at £127 per sq ft per annum, a new high, compared with £71.18 in Birmingham.
“The survey confirms what we in Birmingham have long known,” said Alex. “The city provides a significant cost saving for those businesses looking to relocate out of the expensive South East but what is key is that the savings do not come at the cost of quality.
“Birmingham benefits from world-class amenities and connectivity as a result of more than £1 billion of infrastructure investment in recent years.
“This commitment to investment means Birmingham is now more compelling as a destination than it has ever been and we have seen the fruits of our labour in the significant increase in inward investment in the city.”
Attracting major businesses such as Deutsche Bank, HS2, Extra Energy and HSBC has been a vital catalyst in the city’s growth, while in 2015, inward investment accounted for 30% of all new leases in the city.
“The findings of the TOCS report indicate that this trend will continue,” added Alex.
Oliver du Sautoy, head of research at LSH,said: “While all locations bar one have seen a rise in occupier costs since 2014, the most notable feature of 2016’s survey was the extent to which this growth has varied between locations, linked to divergent patterns in rental movements.
“At one end of the spectrum, we’re seeing double-digit growth in occupier costs in Central London’s emerging fringe districts and parts of the South East while, at the other end, Aberdeen was the sole location to experience falling costs, on the back of plummeting oil prices.
“The strong rates of rental growth witnessed in some locations will put further pressure on occupier costs moving forward. Business rates liabilities in these areas may also rise sharply when the 2017 revaluation comes into effect, and it is quite plausible that sharp rate rises will contribute to a dampening of rental growth.
“The financial case to relocate out of the capital is arguably as compelling as it’s ever been. The relative cost parity that once existed between Central London’s fringe locations and the UK’s core cities has vanished. With occupiers having to look further afield than the capital to reduce costs, the UK’s core cities are well-placed to benefit.”