Fitting out your offices in APAC will cost more in 2021, reveals JLL
Hong Kong ranks 9th place behind Tokyo and seven Australian cities
HONG KONG, 14 December 2020 – JLL announces its “Asia Pacific Fit-Out Cost Guide 2020/2021” today, showing that organizations 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 the report, the average fit-out cost rose 4.7% year-on-year across the region, with labor shortages, health and safety considerations, material availability, and higher delivery costs as the main price drivers.
Hong Kong ranks 9th in Asia Pacific with USD 110 fit-out cost per sq ft, representing a drop of about 8% in 2020. The pandemic has exacerbated existing challenges in Hong Kong after a period of social tension, which contributed to an overall decline in fit-out costs during 2020.
Antje Petermann, Head of Project Management, Project and Development Services at JLL in Hong Kong, explained: “This is because contractors are squeezing their margin to win work this year as many corporates have delayed new CAPEx decision making. Working practices have been disrupted by the pandemic and many organizations in the city now take time to review their portfolios in order to mitigate the financial impacts the pandemic may cause on their business. More occupiers are now electing to renew their leases to save on CAPEX as landlords lower their rental expectations,”
She expects the cost of fitting out will be flat in 2021 because contractors will continue to reduce profit margin in order to sustain workload.
Employers remain committed to reimagine workspaces
Despite overall rising costs in Asia Pacific, JLL believes this will not deter most companies from investing in safe and productive work environments for their employees. The firm reveals that while organizations 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.
“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. 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 workplace and make choices about where and how they work, so I believe investing in a flexible environment pays back in terms of employee engagement,” Martin Hinge, Executive Managing Director, Project Development Services, JLL Asia Pacific said.
“Going forward, our Hong Kong clients are expected to spend more on elements including audiovisual/IT, Mechanical & Engineering services and partitions. Other areas that will gain traction in terms of areas of spend going forward include biophilia, the use of plants in the office, to enhance the feeling of wellness, enhanced materials specifications to cope with regular sanitizing regimes and flexibility in furniture choice and layout,” Petermann added.
Costs vary throughout region
Precipitated by the ongoing construction boom and labor shortage, Tokyo ranks as the most expensive office market to fit out at USD 179 per sq ft for the fourth consecutive year, compared to the regional average of USD 93.
Elsewhere, price increments are expected in Brisbane, Singapore, Beijing, Shanghai, Guangzhou and most Indian cities in 2021, as constraints like access to labor, reliance on imported materials and delayed completion dates continue to pose challenges.
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.”
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.