London has been revealed as the second most expensive office fit-out market in the world, according to a new report from global management firm Turner & Townsend. The study examines fifty-eight cities worldwide and highlights how the growth of AI and an increased demand for premium workspace are impacting international fit-out costs.
A combination of rising demand for premium, highly amenitised Grade A office space and a shortfall in supply has led to double-digit percentage increases in fit-out costs over the past year across major global cities. While New York City has regained the top spot as the most expensive fit-out market globally, London follows closely behind.
Average high specification fit-out costs in the UK capital sit at $5,872 per square metre. Interestingly, this position remains secure despite London costs actually falling by 1% year-on-year, though they have increased significantly in recent years.
“Six years on from the start of the global pandemic, we’d like to imagine that its wounds have largely healed. Yet the impact on the world of business is enduring,” says Nadia de Klerk, global sector sponsor and head of UK occupier and portfolio at Turner & Townsend.
“Occupiers from major global players in financial, professional and legal services to tech behemoths and start-ups are all competing in an international market for talent and investment. They must have top-quality office space which reflects their brand and ambition – but stock is running short.
The changing role of the corporate office
A key driver of the increase in global costs is the changing role of the office and increased demand from occupiers for higher quality, more sustainable workspaces. With the normalisation of flexible working, businesses are working harder to encourage employees to come together. This shift means that a modern office needs to be more than just a place to work; it must serve as a collaborative hub where staff can socialise and innovate.
Forward-thinking businesses are trying to design spaces that not only enable employees to use automation tools, but also integrate technology into the very fabric of the workspace. This includes digitally tracking and syncing everything from specific service usage to climate control and lighting.
In London, the corporate occupier market is being led by a greater number of large-scale fit-outs, with major brands and international players looking for new bespoke space. The financial and professional services sector is the top spender on new fit-outs as companies look to retain talent by offering premium-quality spaces.
The year-on-year picture across the UK is mixed. While London saw a slight dip, Edinburgh and Glasgow experienced a substantial cost rise of 12%, bringing high specification fit-out costs to $3,859 per square metre.
Meanwhile, Manchester and Birmingham saw prices rise in line with inflation at 2% and 3% respectively. Average high specification costs stand at $3,666 per square metre in Manchester and $3,857 per square metre in Birmingham.
Across the majority of UK markets, the acute shortage of Grade A space remains a constant challenge. The post-pandemic stagnation in London development has largely ended, but less new stock will be available until the 2030s. This is particularly evident in the Canary Wharf region, which is undergoing major changes with wholesale retrofits of several major skyscrapers underway to suit modern requirements.
Should I stay or should I go?
This combination of limited inventory and high demand is leading to more businesses encountering a dilemma. Companies must decide whether to pay high rates now at the market peak for new high-quality space, invest in refurbishing existing facilities to stay long-term, or negotiate favourable rents to remain in the same space despite it no longer suiting all of their needs.
“Occupiers have a crucial decision to make and all options come with their own challenges. For example, demand for limited new, Grade A space is pushing up costs, while upgrading existing space can lead to disruption to business operations as renovations are made in situ,” adds de Klerk.
“Essential to making these decisions is engaging early, understanding the real world needs now and for the future, using strong strategic partners, building in flexibility, and balancing value with cost. Only by following these principles will companies make the right decision when it comes to the ‘stay vs go’ conundrum.”
The results do represent some progress from 2025, it should be noted. Last year London was found to be the most expensive fit-out market, ahead even of New York. From that perspective, maybe some companies might feel better positioned to wait out the storm – but ‘second to New York’ is hardly cheap in terms of the costs it invokes.
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