Brexit may have caused office rents in London to become cheaper, as the annual average cost per workstation fell to US$22,665 during the second quarter of 2017, according to a report by Cushman and Wakefield.
The company’s Office Space Across the World report noted that the decline puts the city as the second most expensive place for office rents worldwide. Hong Kong took top spot over London with a 5.5 percent increase in office rents, increasing to $27,432 per year.
Since 2016, office prices inclusive of taxes and service fees in London have fallen 19 percent. While setting up an office in the city became cheaper, take note that underlying expenses for equipment such as office roller blinds and furnishing still determine the overall cost.
Hong Kong outranked London for the first time since 2013 due to demand from Chinese companies, according to John Siu, Cushman & Wakefield’s managing director. These tenants are willing to pay a premium to locate their offices in prime buildings. Siu said that between 2013 and 2016, Chinese tenants had expanded their occupancy by 6 percentage.
UK Market Trends
Despite Brexit’s current impact on office rents in London, JLL expects them to rebound in 2019. It cited foreign investment activity as the major factor for a pickup in prices in the future. This will happen for a good reason since London remains a high-profile place for offices.
This will manifest through an estimated £50 billion of commercial real estate deals by the end of 2017, up more than 15 percent year over year, according to JLL. The increase will take place even with the economic uncertainty surrounding Brexit.
You can set up an office in the world’s cheapest market, but you could still end up spending a lot, depending on the type of office space you want. Setting up an office in Hong Kong or London still seems to be an attractive proposition for many companies looking for prestige, a raised profile and other benefits that come with setting up in an established business hub.