The growth of AI and an increased demand for premium workspace is impacting fit-out costs, a new report has found.

Research by consultancy Turner & Townsend (T&T) said incorporating AI has led to increased demand from occupiers for “higher-quality, more amenitised and sustainable” workspaces.

Its report found that London was the second most expensive city for fit-outs at £4,392 per square metre, behind New York (at £4,403).

Last year London was in the top spot.

It was also higher this year than Edinburgh and Glasgow at £2,886 each, followed by Manchester at £2,742.

“In a digitally enabled world, the most forward businesses are trying to design spaces that not only enable employees to use AI, but also integrate technology into the very fabric of a workspace,” T&T said.

“[This] ensures the foundations are in place to capitalise as new breakthroughs are announced. All of this increases costs.”

T&T said many amenities are now AI-driven, such as the management of climate control and digitally tracked smart lighting.

Nadia de Klerk, global sector sponsor and head of UK occupier and portfolio at T&T, said: “In this new, digitally enabled world, where AI is raising expectations when it comes to the integration of technology, the ideal refurbished space may come with significant costs beyond just the complicated logistical considerations.

“This is particularly the case in London, where a fall in the number of new assets being brought to market post-Covid has resulted in a clear capacity squeeze.”

The report also revealed that the London 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.

T&T found that stagnation in the UK market following the Covid pandemic has largely ended, but the knock-on impacts in London are being felt with less new stock available until the 2030s.

“This is particularly the case in the Canary Wharf region, which is undergoing major changes, with wholesale retrofits and refits of several major skyscrapers underway to suit modern requirements,” it said.

Top spenders on new fit-outs are the financial and professional services sector, the consultancy added.

Iain McIlwee, chief executive of trade body the Finishes and Interiors Sector, said it is “really positive news” for the medium-term future of commercial fit-out across the UK.

“We are starting to see the dawn of a new era where workplaces are not just about where we work, but fundamentally how we can work better,” he said.

“At the best offices create agile spaces that embrace digitalisation and encourage communication and community.

“It is exciting to see that the UK is at the forefront of this reinvention, reflecting positively on the innovative and creative sector and supporting supply chain that we represent.”

The high price of London fit-outs in the T&T report reflects that businesses are now willing to “invest more to ensure that they are getting the best possible space”, he added.

“For me we should be celebrating the fact that the trend is towards accreditations in areas such as sustainability and wellbeing, which brings a requirement for higher standards of design, material use and amenities,” McIlwee said.

Source: Construction News