Office fit-out costs in Shanghai, Beijing, and Chengdu rise nearly 20% year-on-year
JLL launches the latest Office Fit-out Cost Guide
SHANGHAI, December 9, 2021 – The average cost* of designing and building workspaces has risen 10.8% year-on-year across the Asia Pacific region, according to JLL’s latest Asia Pacific Fit-out Cost Guide 2021/2022. Major cities in mainland China also saw significant increases in office fit-out costs, with Shanghai continuing to be the most expensive city, at US$1,101 per sqm.
JLL has been releasing its Asia Pacific Fit-out Cost Guide since 2018. The newly released 2021/2022 guide covers data from more than 30 cities in Asia Pacific. It shows a significant jump in pricing for office fit-outs as the region grapples with the reopening of economies, with the average fit-out cost per sqm now at US$1,109.
Martin Hinge, Executive Managing Director, Project and Development Services, JLL Asia Pacific, explains, "COVID-19 continues to strongly impact the real estate and construction sectors in Asia Pacific. Common themes such as the availability of skilled resources, material shortages and supply chain disruption has driven costs up across the region."
Office fit-out costs in mainland China have risen particularly significantly over the past year, with year-on-year increases of nearly 20 percent in Shanghai (US$1,101 per sqm), Beijing (US$1,002 per sqm) and Chengdu (US$947 per sqm), and more than 12 percent in Guangzhou (US$961 per sqm).
Cindy Li, Managing Director, Project and Development Services, JLL China, says, “Restrictions on power consumption and more expensive raw materials are the main factors impacting fit-out costs in mainland China, which were mainly caused by increasing coal prices and stringent emissions goals.”
It's worth pointing out that office design will continue to feature strongly on many companies' agendas in the year ahead despite rising costs. According to the report, the top three areas that business leaders have earmarked for further investment in 2022 are office technology and audio-visual tools, mechanical and electrical facilities, like sensors and filtration, and sustainability features, such as rooftop gardens, indoor greenery, and water conservation. Two main factors are driving this:
- Changes in the work model: Many companies found success with the remote or hybrid work model during the pandemic, and that trend is now set to stay. This indicates that some degree of flexibility for employees is here to stay although corporates will adopt bespoke strategies depending on business needs, employee sentiment, location and many other factors.
- Sustainability is widely valued: Evolving and adapting the built environment in sustainable and responsible ways is creating upfront value for landlords, occupiers, and investors; especially in the form of risk mitigation, potentially higher asset values and rents, lower operational costs and a more productive work environment attract and retain talent.
We believe that fit-out costs will rise in most Asia Pacific markets over the next 12 months, with material availability, skills shortages and disruption in the supply chain predicated to continuously be the biggest cost drivers for 2022.
Li said, "While the trend of contractors to reduce their overall margins as they compete for work in the short to medium term is set to continue in 2022, and to balance out labour cost increase, office fit-out costs in mainland China are expected to continue to rise in 2022. Moving forward, when fitting out offices, companies will focus more on two key factors, hybrid working and sustainability, which will continue to transform office design."
To download the Asia Pacific Fit-Out Cost Guide 2021/2022, please click here.
* The average fit-out cost is based on progressive medium specification style.
Note: The exchange rate used for the Asia Pacific Fit-out Cost Guide 2021/2022 is RMB 6.48 per US dollar.
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 $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.