Shanghai, 13 December 2022–The average cost to fit out workspaces continues to rise, increasing by 4.5% year-on-year across the Asia Pacific region. According to JLL’s APAC Fit-Out Cost Guide 2022/2023, the average fit-out cost per sqm now sits at US$1,159, up from US$1,109 last year.

The biggest price increases were seen in Australia, Singapore, Malaysia and the South Asia markets. For the first time in half a decade, Sydney has overtaken Tokyo as the most expensive market in Asia Pacific for office fit-outs with the cost of US$1,946 per sqm, with the latter having held the top ranking for five consecutive years. While Mainland China and South Korea reported modest year-on-year (y-o-y) price increase which has tempered the regional average, Beijing overtakes Shanghai as the most expensive city for office fit-outs in mainland China with the cost of US$1,017 per sqm.

According to the report, price increases in most markets were due to factors such as rising fuel and raw material costs, which influenced construction pricing in 2022. Supply chain disruptions and covid-19 containment measures have also impacted production rates, timing, and material costs. In addition, global headwinds have slowed the pace of recovery. At the same time, progress has been slowed by ongoing geopolitical tensions which have exacerbated energy and supply chain constraints, fueling a second wave of price increases.

Martin Hinge, Executive Managing Director, Project and Development Services, JLL Asia Pacific, says, “While most markets have returned to normality, many continue to face challenges that can be attributed to the pandemic. We expect these factors to continue to drive construction price inflation over the next 12 months.”

With the continued hike in interest rates globally and financial instability of contractors and sub-contractors in many markets, there is further risk of consolidation and a reduction in competition. Meanwhile, the competition for talent intensifies and access to skilled and semi-skilled labor remains critical.

Hinge adds: “Current levels of price inflation are unsustainable, but as the supply chain stabilizes and the increased risk of occupiers deferring projects leads to a consequent softening of demand, we expect that fit-out cost increases will moderate towards the end of 2023 when current challenges are expected to unwind. This is barring another significant economic event that could flatten or reverse current trends.”