Space efficiency continues to drive down occupier office costs

IPD Occupiers Blue Chip Office Index reveals 15% reduction in office accommodation costs

Article posted: 06 Jan 2012

Blue-Chip Occupiers in the IPD databank have managed to reduce the costs of office space in the UK by 15%, through cost control and improved accommodation use.

The IPD Occupiers Blue Chip Office Index, released as a consultative index on December 19th, pending a full index release next July, has been created to provide occupiers, investors and suppliers with a credible time series (based on real data) which tracks how costs and the use of office space are changing. Information is drawn from both IPD’s database of UK rents and IPD’s Occupier benchmarking service.

“Our clients represent some of the largest Occupiers in the UK, and what we see here is the culmination of aggressive cost control, the move to open-plan working, and extensive portfolio rationalisation” said Glenn Corney, Global Product Manager for IPD Occupiers.

Average space per person has fallen, on average, by 4% per annum, across all regions in the UK. This is a product of both the rationalisation of company portfolios and more efficient use of space. The average net internal area per person is now around 10 square metres per person.

Corney continued, “With most of organisations introducing some form of flexible working, we would expect reduced space demand to continue to be the main lever for cost control, which has wider implications for the UK office market.

“Rental growth for offices has been largely flat for the last 5 years, and occupier demand is unlikely to rise amidst the current economic uncertainty and growth forecasts. Set against this the index numbers - which show occupiers require less space and are still looking to cut costs– imply even more difficulties for the growth of the office sector.”

IPD aims to establish a reliable indicator of credible and trackable performance data which enables businesses, their suppliers and advisors to understand changes in the real estate they occupy, how they are occupying it, and the services and resources they use.

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Posted by Jules