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Savills' Live/Work Index measures: '…the total costs per employee of renting living and working space on a US dollar basis in 12 world cities.' The report confirmed that big increases in office rents and the pound's strength against the dollar have contributed to London's ascendency in the rankings.

London's real estate costs grew in US dollar terms by an annualised rate of 10.6% in the first six months of the year. Overall, the US dollar cost of residential and commercial accommodation in London has increased by 39% since 2008. At US$121,000 per year, London is now the most expensive city in the world in which to accommodate staff.

Although it's climbed from 5th to 1st place since 2008, London is still far from the live/work accommodation costs record of US$128,000 a year. This was set by Hong Kong in 2011.

THE 'EGO APPEAL' OF LONDON'S SKYSCRAPERS
According to Knight Frank's Global Cities 2015 index, London's high-rise office space is the 4th most expensive in the world behind Hong Kong, Tokyo and Manhattan. Office space in skyscrapers such as The Shard can command an average of £1,467 per square foot.

The report suggested that the 'ego appeal' of London's upper floor skyscraper offices, with their panoramic views, can command a 15- 20% premium over typical rents. The Global Cities 2015 index also found that London is the highest ranked European city, with capital values on upper floors more than double those of skyscrapers in Paris or Frankfurt.

THE RIPPLE EFFECT
London may be the most expensive city in the world in which to accommodate staff, but the wider UK market is also feeling the effects of rising office rents. According to the Cushman & Wakefield report, "Office Space Around the World 2014", Manchester commands an average of £30 per square foot per year (sq ft/yr). This is up slightly from £28.50 in 2013.

In Birmingham, occupiers spend an average of £27.50 sq ft/yr on their office space, while rents in Edinburgh and Glasgow sit at £29 and £28 respectively.

REDUCING THE FOOTPRINT: DOWNSIZING OFFICE SPACE
Public sector budget cuts and the pressures that local government is under have been regular features in the news and headlines recently. As part of reducing their footprint, local authorities up and down the country have been cutting office space to make up for the shortfall.

What we're seeing more and more is local authorities downsizing by condensing their office space. In some cases, organisations have downsized from three buildings into one building. Although it's a quick way of freeing up space and cutting costs, it does create immense pressure on the space now available to these organisations. And it's not just the public sector. The banking sector too has been subject to office space cuts.

A recent poll by CB Richard Ellis (CBRE) found that three quarters of banks with a presence in London plan to do this reduce floor space there in a bid to rein in spending and boost efficiency ahead of regulatory changes. This could also be partly due to a trend for relocating to smaller regional premises instead of having big offices in central London.

It's thought this could cut the cost of real estate for banks by up to 40%, something that may be necessary as they cope with job cuts after the scandals of the credit crunch era. Also, since mid-2009, City rents have gone up from £42.50 per sq ft to around £57.50 per sq ft, meaning more firms may be keen to move to less expensive premises.

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