Office fit-out costs on the rise, up by 4.5% year-on-year in Asia Pacific
Beijing overtakes Shanghai as the most expensive city for office fit-outs in mainland China
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.”
The continued quest for sustainable and employee-focused workplaces
Despite the price increases, companies will continue to invest in better quality workspaces including continued investment in technology to accelerate the deployment of dynamic and flexible working models, to improve workplace performance, and to embed their sustainability commitments into design and the specification, in order to build a workspace that could drive collaboration, attract and retain talent, enhance physical and mental health and wellbeing.
Cindy Li, Managing Director, Project and Development Services, JLL China, says, “With collaborative working as one of the primary purposes of office space in a hybrid working model, JLL is committed to helping organizations transform their workspace to encourage both new and current employees to spend time in the office. In a hybrid working world, quality and employee-focused workspaces can be the difference that organizations need to get ahead in the talent war.”
According to the Future of Work survey by JLL earlier this year, occupiers are spending more to improve sustainability ratings over the next 12 months; There are indications of increased spending on elements that allow operation of buildings in a more carbon efficient manner, with Mainland China and other North Asian markets having a higher spend compared to the regional average. These expenditures include low energy appliances and efficient lighting systems, and the provision of occupancy sensors to provide analytics for decision making. As evidence of the trend to shift offices toward more collaborative environments, we see a reduction in spend on traditional office elements such as partitions.
“As organizations strive to reimagine their workplaces to adapt to the changing role of the office and reprioritize employees’ well-being, we can expect to see greater commitment and spending on spaces and design elements, which would improve employee engagement and well-being while simultaneously meeting climate targets, meeting net zero commitments and meeting expectations of their employees that the workplace will contribute positive impact on the environment.” concludes Cindy Li.
To download the Asia Pacific Fit-Out Cost Guide 2022/2023, please click here.
*Average fit-out costs are based on medium specification fit-out style
Note: APAC Fit-Out Cost Guide 2022/2023 uses an exchange rate of US$1 to ￥6.48
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 $19.4 billion, operations in over 80 countries and a global workforce of more than 102,000 as of September 30, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.