Fitting out your offices will cost more in 2021, reveals JLL
Global real estate firm highlights labour shortages and supply chain disruptions as main factors
Shanghai, 20 January 2021 - Organisations should expect to pay more to redesign or upgrade their workspaces in 2021, even while many are trying to decrease capital expenditure (capex) due to the financial impact of the pandemic, according to a report by real estate consultancy JLL (NYSE: JLL).
The firm’s Asia Pacific Fit-Out Cost Guide 2020/2021 reveals that the average fit-out cost rose 4.7% year-on-year across the region, with labour shortages, health and safety considerations, material availability, and higher delivery costs as the main price drivers.
Martin Hinge, Executive Managing Director, Project and Development Services, JLL Asia Pacific, explains: “Cities that rely heavily on foreign labour have struggled with labour shortages, and governments have imposed stringent measures, including enhanced inspection routines and enforced health and safety protocols, for construction sites to reopen. These are important and necessary precautions. However, the impact on productivity and extended project timelines are driving costs up.”
David Cole, Head of Project and Development Services, JLL China, says, “China was the first major economy to register positive economic growth in 2020, boosted by government spending, strong exports and a reduced number of COVID-19 infections. Although the market appears to be on a tentative path to recovery, Beijing, Shanghai, Guangzhou and Shenzhen have seen a cautious approach from occupiers. In addition, most of these markets are reporting rising vacancy with new office completions, the willingness to renovate the workplace remains to be seen.” The average fit-out cost for Shanghai and Beijing recorded at USD 920 per sqm and USD 840 per sqm respectively, according to JLL’s latest report.
Employers remain committed to reimagine workspaces
Despite overall rising costs, JLL believes this will not deter most companies from investing in safe and productive work environments for their employees. The firm reveals that while organisations may be re-examining their real estate footprint, workspaces still play an integral role in preserving a company’s corporate culture, as well as to recruit and retain talent.
“Working practices have been disrupted like never before and many organisations are now reviewing their portfolios to mitigate the financial impact of the pandemic on their business. As people start returning to work, many are modifying their offices to accommodate de- densification measures and incorporating more technologies to facilitate both in-office collaboration and remote working,” adds Hinge.
“Employee expectations, along with the sudden change in working habits, require companies to consider how spaces can be used to boost productivity and efficiency. In many ways, employees have become consumers of the work place and make choices about where and how they work, so I believe investing in a flexible environment pays back in terms of employee engagement.”
Costs vary throughout region
Precipitated by the ongoing construction boom and labour shortage, Tokyo ranks as the most expensive office market to fit out at US$1927 per sm for the fourth consecutive year, compared to the regional average of US$1001.
Elsewhere, price increments are expected in Brisbane, Singapore, Beijing, Shanghai, Guangzhou and most Indian cities in 2021, as constraints like access to labour, reliance on imported materials and delayed completion dates continue to pose challenges. Competition remains fierce among contractors, and this will help to offset some of the increase.
Meanwhile, Auckland, Bangkok, Manila, Seoul and Taipei may see fit-out costs stabilizing or even dipping slightly, as many construction service providers and contractors have resorted to reducing overall margins.
“Though fit-out costs vary from market to market around the region, we believe the overall upward trend will likely remain in 2021.Workplaces will continue evolving, and there remains a strong motivation for companies to invest in areas such as technology, health and wellness, to meet increased expectations from employees, as we all adjust to the new normal,” concludes Hinge.
To download the Asia Pacific Fit-Out Cost Guide 2020/2021, please click here.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.