Despite a calming of inflation in the wider economy, strong rental growth for prime quality offices has driven inflation-stripping rises for UK office costs.

Across the 54 surveyed locations, the average cost of occupying a new-build office increased by 5.7% over the over the 12 months to September 2024, accelerating from 3.4% last year. Meanwhile, the cost of occupying older, 20-year-old buildings was less pronounced in this year’s survey compared with new build, rising by an average of 4.3%.

Despite the relatively strong increase in total office costs observed over the past three years, costs remain lower in real terms compared with the position on the eve of the Global Financial Crisis in 2008. Adjusted for inflation, total costs for new build offices stand 6% below the position 16 years ago.

Flight to quality drives overall cost increase

The main driver of this year’s increase in new-build office costs stemmed from rental growth, which increased by 9% on average across the 54 locations. This was among the strongest annual increases in rent costs since TOCS began over 20-years ago, accelerating from already-strong growth of 7% in last year’s survey.

While several other office-related costs saw stronger percentage rises over the year, growth in rents had the most impact on overall costs, due to it being the most sizeable element of typical office costs (making up 39% of total costs on average).

Coming amid a challenging period for the UK economy, strong rental growth reflects a clear flight to quality in occupier demand seen in the wake of the pandemic, fuelled by a relative lack of available prime quality options in most of the UK’s key office markets.

Flight to quality was also reflected in slower rental growth seen for 20-year-old buildings, which amounted to 5% in this year’s survey. While this was the strongest rate of growth for 20-year-old buildings since 2018, it was the sixth successive year that 20-year-old buildings saw slower rental growth than new buildings.

Minimum wage uplift drives other cost increases

Despite the overall headline rate of UK inflation returning to within touching distance of the Government’s 2% target rate during 2024, inflationary pressures persisted across several of the 22 office costs. Security costs, catering costs and cleaning costs all saw double-digit percentage rises in in this year’s survey, all of which were largely attributed to the rise in the National Minimum Wage (NMW), which increased by 9.8% in April 2024.

Energy costs in perspective

The only office cost metric to see a decrease in costs since last year’s survey was energy costs. According to data from energy services provider ZTP, energy costs for new buildings fell by 10% year-on-year, partly offsetting the rises seen across the other cost metrics. However, while energy costs are 50% below the peak position seen at the hight of the energy crisis in mid-2022, they remain relatively elevated in an historic context, accounting for 3.5% of total office costs for a new-build office in the 2024 survey compared with an average of 2.8% over the five years prior to the energy crisis.

The overall cost premium associated with new office buildings due to higher rents continues to be partly offset by the higher energy costs associated with less efficient 20-year old office buildings - per sq ft energy costs for older 20-year old buildings are more than twice that for highly efficient, sustainability-accredited new-build offices. Indeed, despite the sharp fall in energy prices since the peak in 2022, the new-build office cost premium over 20-year old buildings stands at only 12%, some way below the long-term average premium of 16%.

Berkshire towns see strongest cost increases

As ever, London’s core West End remains by far the UK’s most expensive office location, with the annual cost for a new office in Mayfair standing at £24,785 per workstation, 150% above the UK average and 63% ahead of the next most expensive location, the City of London.

Differing rates of rental growth over the past year drove notable contrasts in overall office cost movements across the 54 locations. With regard to new buildings, Reading and Maidenhead saw the sharpest annual increase, with total costs rising by 16% and 15% respectively on the back of a substantial rental growth. In both locations, this growth was secured through the arrival of high quality schemes to their respective markets, namely Tempo in Maidenhead and One Station Hill, Reading.

Implications for office occupiers

In a bid to drive greater efficiencies, logic dictates that increasing costs will prompt an ever greater number of businesses to rethink their office space requirements, with a view to exchanging quantity for quality. With regard to office space, quality spans a range of attributes, including location, on-site amenity, internal character and environmental credentials.

The higher energy costs observed for older, less environmentally efficient buildings alongside growing business demand to demonstrate ESG commitments only strengthens the case for seeking out better quality space.

If your business is reconsidering its office space requirements and is seeking advice on any of the issues raised in this article, please get in touch with our team of office experts at ProjectDriven@lsh.co.uk 

The pandemic has underlined the importance of providing happy, healthy workspaces. Jane Leese from TOCS contributor Urban Planters explains the crucial role plants can play in enticing workers to the office in the new working world.

The future of healthy, happy and productive workspaces

In the wake of the pandemic, there has been a significant shift in how we perceive work and the workplace. 

While working from home has become more popular, people are also starting to appreciate the many benefits of working in an office. Recent studies of employees found that the office is the preferred place for a range of working activities, including collaborative working, support from co-workers and line managers and for professional development opportunities. 

We need to take a more holistic understanding of what makes the office an essential part of our work lives when designing a workplace that will continue to attract workers. 

As a result, more and more businesses are focussing on creating workspaces with features that encourage productive activity in their workforce, and plants play a key part in. 

Recent research on employees have found one of the most popular features in workplaces are spaces connected with nature, such as outdoor spaces, gardens and office plants.

Plants help create productive workplaces in two ways: they improve the air we breathe and provide a therapeutic connection to nature.

Contemporary office planting design can pack a visual punch

Take a breath

Plants play a crucial role in maintaining healthy indoor air quality. They replace carbon dioxide (CO2) with oxygen, improve humidity levels, and remove harmful toxins, dust, mould, and bacteria. Plants also improve humidity levels – hugely beneficial to counteract the effects of air conditioning and central heating.

Cleaner and more humid indoor air works wonders for our sense of wellbeing. We can concentrate and focus better, and studies have found that common ailments such as tickly coughs, sore throats and headaches decrease in buildings with a good amount of live plants.

The quality of our indoor air is more important now than ever: we are all indoors a great deal more than our ancestors (by some measures, we are inside for an average of 90% of the time), so finding ways to improve that air quality means we can all breathe easy.

Back to nature

Biophilia: a big word for a simple concept. In short, it means we humans have an intuitive connection to nature. 

The word ‘biophilia’ was coined by social psychologist Eric Fromm in 1964, but in recent years it has become a veritable buzzword in our industry. This is because more and more people are realising the importance of reconnecting with our natural roots to counteract the stresses of our busy lives.

The lift we experience from seeing any view of nature runs deep. We may not be aware of it, but seeing natural features such as trees, water and plants speaks to our ancestral roots when we lived outdoors and had a more direct link to nature. 

As a result, seeing or being among natural elements has been proven to improve our mental health and general sense of wellbeing. We are also more productive, creative and better at concentrating when we have a dose of nature in our daily lives.

Studies have even found that, on average, patients with a view of nature from their hospital bed recover quicker.

All of which explains why many employees cite plants when describing their ideal workplace. Indoor plants provide us with an instant visual link to nature (the biophilic aspect), which in itself has very real effects on our health and wellbeing. 

At a simpler level, having plants about the place make our workplaces feel more welcoming and relaxing. Even artificial plants can achieve that, good news if your workplace has low light levels.

Integrated planting is a popular design feature in larger spaces

Changing demands

Urban Planters, has been bringing homes and workplaces to life with plants since 1965 and we have seen the industry evolve dramatically over that time. 

When we first started out, plants were mostly an after-thought for businesses wanting to add a few extra décor features around the office. Specimens on offer were limited, pots too. 

Fast forward to now, and plants are considered an important, sometimes even essential, element of modern workplace design. 

Now, clients want plants first and foremost for their health and wellbeing benefits. Having plants around the workplace demonstrates that an employer wants to provide their workforce with a healthier, happier environment.

As such, we are often brought in at the early stages of planning for new office buildings, to ensure the planting is worked into the design for a more integrated feel. 

Of course, the visual appeal of office planting is still a major part of the decision, and the huge range of specimens is matched only by the variety of containers – from natural stoneware pots to glossy contemporary troughs, as well as bespoke planters integrated into benches and cabinets, we can provide planting and containers to suit any setting. 

Another growing trend in planting is the green wall. Again, the variety of options here is vast. Sweeping living walls that cover entire buildings, moss walls laid out in logos or other signage, planting wrapped around columns and mobile divider green walls on castors to reconfigure large spaces, this is a design feature which offers numerous possibilities, all with big visual impact. What’s more, they take up little to no floorspace, so businesses in smaller premises can maximise the health benefits of plants while still having plenty of room to manoeuvre.  

Moss walls are versatile and great for places with low light

Professional planters

Deciding what’s right for your office and staff requires specialist expertise. At Urban Planters, we offer a wide range of plant-centric services, from live and replica office plant displays, green walls, live flowering displays (longer lasting than floral arrangements), exterior landscaping and maintenance and Christmas decorations.

We work with trusted plant and plant product suppliers to ensure all our clients receive a high-quality product, and we offer maintenance contracts to ensure your office plants continue to thrive.

We are industry leaders in the UK and were among the earliest promoters of the health benefits of plants in the workplace. 

Our clients range from multinationals to family-run restaurants and we have local teams throughout the UK who design, install and maintain our plants with professionalism and expertise. We regularly work with architects and office designers to ensure planting schemes are thoughtfully integrated into workplace design to maximise biophilic impact.

Green in more ways than one

Bringing workspaces to life with plants is our passion, but we are also committed to growing our business in a more sustainable way.

Climate change is complicated, and we are all still working out the best way to be truly sustainable. What we do know is that businesses must do something now, to start to offset the impact we all make on our planet.

Our overall goal is to become a positive impact company, supplying high-quality products and services without causing unnecessary harm to the planet. This is of course far more complicated than it sounds, but we are integrating more and more sustainable practices into our business, be it using sustainable planters, planting for greater biodiversity or offsetting our carbon emissions. 

Over the many decades we have been in business, we have grown alongside the many changes in the landscaping industry, building up a wealth of expertise along the way.

As our industry evolves, so does the look and feel of the contemporary workplace, and we are confident that planting will play a key role in creating healthy, happy and productive indoor spaces.

Thank you to Jane Leese from TOCS contributor Urban Planters for providing this article.