When considering the cost of office space, many occupiers (and agents) will focus solely on rents per sq ft. However, might it be the case that we are defining the true costs too narrowly and missing out on many knock-on expenses by simply focusing on rent?

A blog such as this may be categorised by some as self-serving, written by an agent trying to push up rental values. But the reality is we continually hear two things across regional offices markets: there is a war for talent, and most occupiers are keen to get staff back to the office (for at least part of the week) to benefit from collaboration, learning and culture. These comments apply to a multitude of sectors, including but not limited to legal, consultancy, technology and the wider corporate sector.

It is generally accepted that the cost of replacing staff is a multiple of their salary to take into account items such as notice periods for outgoing or incoming staff; recruitment fees, training and, of course, that businesses very often have to pay more to replace like with like (that is, employees need to be incentivised to move). The type of accommodation that an organisation occupies makes a fundamental statement about a business and also how it values its staff – this is a key aspect in both attracting employees in competitive markets and ensuring they stay. 

In terms of encouraging staff back to the office, many businesses are coming to recognise that tired, ‘stale’ offices are not incentivising. While hybrid working is and will become a very valuable way of working, there are important elements of office life that benefit both individual and business that cannot be replaced with individual home-working.

So considering the above, many of those focusing on saving the pence on office rents perhaps need to take a slightly wider perspective on the true meaning of cost, the medium or longer term implications for their business and the value of investing in better workspace that meets today’s working demands.

This is true for landlords, just as it is for tenants. Across our national office agency network at Savills we hear occupiers commenting on the lack of true quality space. This in its own right is a function of repressed rents, as if it doesn’t stack up for a landlord to build a quality office we will see no new development, or instances where quality design is ‘watered down’. This is particularly relevant in light of recent construction price inflation, but it’s a price that will only be endured later.

Further information

Contact Mike Irvine

Why Edinburgh’s prime offices could be Grade A, B or C