More Expensive to Build, but as Important as Ever
- Japanese cities the most expensive to fit out in Asia Pacific; regional average increase 18 percent
- Return-to-office, and how to achieve it, still driving fit out decision-making
- “More considered” decisions see occupiers opt for quality over quantity
Persistent inflation, tight labour markets, and ongoing supply chain delays have increased average fit out costs across Asia Pacific, according to Cushman & Wakefield’s 2023 Asia Pacific Office Fit Out Cost Guide, but major occupiers are absorbing the higher spend in their quest to improve return-to-office rates.
Head of International Research and co-author of the report Dr Dominic Brown said that while fit out costs were up across the region by an average of 18 percent in local currency (7 percent in US dollar terms), there were early signs of easing pressure.
“Although costs remain above historic levels, supply chain stress has eased slightly along with the cost of shipping, and declines from the commodities pricing peak in 2022 have reduced pressure on energy and fuel pricing. Inflation, while still high, is believed in many economies to have either peaked or to be close to peak,” Brown said.
The report showed that North Asia markets remained the most expensive to fit out in a ‘Collaborative Hybrid’1 style, with only Canberra, Australia also appearing among the top five. Within the top 10, Hong Kong was the only market outside of North Asia and Australia/New Zealand to feature.
Dwitje Wangsadiputra as Director of Project Development Services, Cushman & Wakefield Indonesia stated that in Indonesia, the input costs have increased by 5% to 7% over the year, with the exception of labor which has only risen by 2% approximately. “Meanwhile cost still remains the single item clients are most focused on.” she added.
Cushman & Wakefield’s Asia Pacific Head of Project & Development Services Tom Gibson said despite higher costs and constraints on capital expenditure, the conversation with occupiers remained focused on the changing working environment: “How much space do I need, and what is it going to look like?” he said.
“Finding the balance between working from home and having people in the office – and how the right design can facilitate that – is still the number one conversation in most markets.”
Gibson said general economic volatility had slowed occupier decision making as capital expenditure across all sectors came under closer scrutiny. But he said the flight to quality being witnessed in leasing transactions was also being reflected in fit out decisions. “Occupiers are looking at how they can optimise their spend,” he said.
“They see real estate as an essential expense and so they are looking to use their real estate to improve the employee experience.” He said that in many cases, that meant taking on less space that was of higher quality.