Consultant Turner & Townsend’s latest global fit-out report ranks London behind only New York, despite costs in the capital easing 1% over the last year.

High-specification fit-out costs in London now stand at $5,872 (£4,397) per sq m, just behind New York at $5,886 (£4,407) per sq m.

The consultant said demand for premium, highly-amenitised Grade A offices is continuing to drive fit-out budgets as firms invest in better workplaces to tempt staff back into offices and compete for talent.

AI-ready offices are also adding to costs as occupiers demand smarter systems for lighting, climate control, space usage, collaboration areas and digital connectivity.

Regional UK cities remain cheaper but are also seeing cost pressure.

Edinburgh and Glasgow saw fit-out costs have jumped 12% to $3,859 (£2,889) per sq m, while Birmingham rose 3% to $3,857 (£2,888) per sq m and Manchester increased 2% to $3,666 (£2,745) per sq m.

Dublin climbed 10 places in the global ranking to 18th after costs surged 12% to $3,878 (£2,904) per sq m.

Turner & Townsend said London’s corporate occupier market is being led by major brands and international players looking for large bespoke offices.

The report said the post-pandemic slowdown in London development has largely ended, but the impact is now being felt through a shortage of new stock coming forward.

That squeeze is particularly acute in Canary Wharf, where several major towers are undergoing wholesale retrofit and refit programmes to meet modern occupier demands.

Turner & Townsend said the lack of Grade A space is forcing more occupiers into a “stay vs go” decision — whether to pay peak market rates for new space, refurbish existing offices, or negotiate better terms to remain in buildings that may no longer fully suit their needs.