Key drivers for Europe's workplace strategy shift

The world of work is evolving and, with this, fit-out and office refurbishment is becoming much more complex. Talent, sustainability and cost must all be factored into workspace decision making across Europe and beyond. 

Companies today face a careful balancing act when looking to create best-in-class workspaces in a rapidly changing world.  

Every euro counts when trying to maximise operational efficiency while providing workspaces that foster collaboration, culture and productivity at a time of stubborn construction cost escalation and ongoing geopolitical tensions across Europe. 

As organisations – both public and private – continue to grapple with how best to operate in this tough landscape, fit-out and refurbishment of office space has become increasingly complex. 

Here, we explore some of the core focus areas that need to be considered when making decisions about workplace strategy and fit-out projects. 

Keeping a handle on cost 

Across Europe, the cost pressures on corporate occupier fit-out projects persist, with prices remaining elevated following the market disruption of recent years. The picture, however, is nuanced. Project costs are beginning to stabilise due to the impact of slowing inflation on input costs and higher interest rates constraining demand.

Cultivating and retaining a talent pipeline 

Despite the challenging economic backdrop, competition around talent continues and is a major driver for new office demands. Attracting and retaining talent is one of the primary considerations for occupiers when deciding to take up space, and this has a major effect on workplace strategy.   

In Munich, for example, there is a strong pipeline of graduates stemming from one of the continent’s most prestigious engineering schools, the Technical University of Munich. This makes the city a ‘go-to’ for major tech players setting a high bar for office fit-out.  

The technology sector has always leaned towards prime space to marry with both customers’ and employees’ expectations of the sector. Our own data in our Global occupier fit-out report for 2023 demonstrates the premium that grade A workplaces command when it comes to fit-out, with average costs at €2,700/m², compared with €2,160/m² for a medium-specification fit out in the same market. 

This trend is not just limited to technology businesses, though – it provides a benchmark for the wider market too. As employers fight to attract and retain the best talent, overall specifications creep upward in cost and quality. Companies in all sectors are working to encourage people back into the office, deliver increased productivity as the continent pushes for economic growth and right-size their portfolios while offering quality space with an eye on cost. 

In some markets, this means competition for labour and resources is playing out in unexpected ways. In Paris, high-specification fit-outs compete with the luxury retail brands and top-end hotels of the Champs Elysee and beyond, driving up average costs per m² to nearly €1,000 more than an equivalent mid-range office. 

Occupiers need to be factoring employee expectations into their plans too. Modern workers want a healthy range of amenities that may include collaborative working areas, social spaces, state-of-the-art technology, bicycle racks or on-site showers, but this all comes at a cost. For example, in Munich, the price of a coffee or tea point in a high-specification fit-out sits at €3,610/m² – compared to a more standard open plan office, which, in the same class of fit-out, will cost €1,860/m². 

Assessing the costs of sustainability strategies 

Another factor driving decision-making is sustainability. Companies need to meet long-term carbon goals and flex to ever-changing regulations, while great swathes of the European workforce are alive to the urgent requirement to protect the planet. Furthermore, young talent increasingly identifies with employers who have a strong purpose aligned to social and green values. 

Companies continue to explore life cycle assessments and strategies to improve energy efficiency both from an operational and embodied carbon lens. Part of this has seen a move towards gaining Building Research Establishment Environmental Assessment Methodology (BREEAM), Leadership in Energy and Environmental Design (LEED) or similar accreditations as major corporates look to meet the new European Sustainability Reporting Standards (ESRS) linked to green finance and ESG investing. We saw this recently in supporting Pinsent Masons on their BREEAM and WELL certified 1,350m² fit-out in the Crossover building in Amsterdam, taken as part of a green lease.  

In recent years, some international companies have made the decision to move to centralised campuses to consolidate their portfolios and accelerate their sustainability goals. However, this remains less common in Europe where the pull of established commercial centres is still strong. In satellite locations, businesses are weighing up the cost-benefit output when much of their operations are increasingly virtual. This is also partly impacted by the high labour costs across the continent due to the constricted supply chain for construction activities. 

Businesses in Europe would be wise to keep watch of the costs that come with achieving carbon reductions. This may involve decisions on whether to request space from developers at shell and core to avoid stripping back a generic landlord fit out and will need to be judged on a case-by-case basis. Once again, budgetary implications will be vital here – weighing up both financial and carbon costs. 

Leveraging data to navigate the market 

Across the real estate market access to, and the application of, data is becoming ever more critical, and the fit-out market is no different. Companies wanting to maximise their investments and foster the right working culture need to understand the decision drivers that are impacting the European office market – whether that is the premiums that come with central locations providing access to high-performing graduates or factoring in the sustainability commitments being made at board level. 

Through a keen understanding of these dynamics and how they are driving the market, clients will be able to successfully navigate an increasingly complex landscape and create workspaces that deliver for them.