Fitting out your offices will cost more in 2021, reveals JLL
Global real estate firm highlights labour shortages and supply chain disruptions as main factors
According to JLL’s latest report on fit-out cost, organisations 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.
The firm’s Asia Pacific Fit-Out Cost Guide 2020/2021 reveals that the average fit-out cost rose 4.7% year-on-year across the region, with labour shortages, health and safety considerations, material availability, and higher delivery costs as the main price drivers.
Martin Hinge, Executive Managing Director, Project Development Services, JLL Asia Pacific, explains: “Cities that rely heavily on foreign labour have struggled with labour shortages, and governments have imposed stringent measures, including enhanced inspection routines and enforced health and safety protocols, for construction sites to reopen. These are important and necessary precautions. However, the impact on productivity and extended project timelines are driving costs up.”
Despite overall rising costs, JLL believes this will not deter most companies from investing in safe and productive work environments for their employees. Working practices have been disrupted like never before and many organisations are now reviewing their portfolios to mitigate the financial impact of the pandemic on their business. 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,
Specifically, JLL notes that some companies have begun to modify the design of their office, offering more options in the types of space employees can choose to be most productive. Independent tasks can be work on remotely, while the traditional office will be a place for teamwork or clients meetings. To optimize space, some companies choose to convert part or all of an existing office into a flexible space, or partner with a third party when it comes to short- or mid-sized office expansion.
Precipitated by the ongoing construction boom and labour shortage, Tokyo ranks as the most expensive office market to fit out at US$1921 per sqm for the fourth consecutive year, compared to the regional average of US$998/m2 in the progressive office category. Elsewhere, price increments are expected in Brisbane, Singapore, Beijing, Shanghai, Guangzhou and most Indian cities in 2021 for aforementioned reasons.
JLL recorded a jump in Ho Chi Minh City’s fit-out cost for the progressive layout to US$751 per sqm, while for Hanoi is US$772. These rates make the two cities in Vietnam more affordable than many other major cities in APAC, namely Manila, Kuala Lumpur and Guangzhou.
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, JLL believes 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.
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, operations in over 80 countries and a global workforce of nearly 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.