Hong Kong office fit-out costs rebound 9% year-on-year: JLL
Worker salary review in 2022 will lead to rising costs
HONG KONG, 1 December 2021 – Hong Kong's average cost of designing and building workspaces has rebounded 9% year-on-year and is now back to the level prior to onset of the Covid-19 pandemic, according to JLL's Asia Pacific Fit-Out Cost Guide 2021/2022.
The city's average office fit-out cost rebounded to USD 120 per sq ft (HKD 935) this year after it dropped about 8% in 2020. Hong Kong has experienced relative economic and political stability over the past year and the pandemic is contained, which has led to increased confidence, increased business and consequently, higher construction cost.
The research reveals that fit-out costs vary from market to market, ranging from USD 177 per sq ft in Tokyo, Asia Pacific's most expensive market, to USD 62 per sq ft in Ahmedabad, India. Hong Kong's office fit-out cost ranks the 9th most expensive in Asia Pacific, the same as last year.
Ryan Wong, Head of Project and Development Services at JLL in Hong Kong, said: "The market has recovered and resumed to normal as the pandemic is contained and companies' confidence toward the business outlook has increased. This has supported contractor pricing returning almost back to normal. At the same time, the sharp increase in raw metal material cost boosted the cost of mechanical and electrical (M&E) trades and IT infrastructure."
"An anticipated worker salary review in 2022 is likely to see a more significant uplift to salary benchmarks than previous years, which would likely fuel an increase in labour cost. Meanwhile, the power limitation in mainland China's factories would also affect the cost, and as such, we believe the fit-out cost will continue to rise next year," he added.
According to the report, the average cost of designing and building workspaces has risen 10.8% year-on-year across the Asia Pacific region, with the average fit-out cost per sq ft now at USD 103.
The factors behind the price increases in most markets were due to direct implications of the pandemic, such as supply chain disruptions, labour shortages, material availability and the rising cost of raw materials.
Martin Hinge, Executive Managing Director of Project Development Services at JLL Asia Pacific, explained: "As the region grapples with the reopening of economies, we are seeing a significant jump in pricing for office fit-outs, especially in cities that rely heavily on foreign labour and imported materials."
Over the next 12 months, JLL predicts that it will likely become more costly to fit out an office, particularly in some markets in China, India and Southeast Asia.
"Given the continued restrictions around the deployment of labour and having to seek alternative and potentially more expensive materials, there remains a high possibility that price increases will sustain across the region," Hinge added. "However, there are some signs of green shoots as vaccination rates rise and travel commences pan-region. This may ease the manpower and skills shortage in certain markets."
Sustainability will shape the future of office design
Despite rising costs, office design will continue to feature strongly on many companies' agendas in the year ahead. According to the report, the top three areas that business leaders have earmarked for further investment in 2022 are technology and audio-visual tools, mechanical and electrical facilities, like sensors and filtration, and sustainability features, such as rooftop gardens, indoor greenery and water conservation.
Hinge said: "Building an office in a sustainable and responsible way creates upfront value for companies. Not only can they decrease operational costs by driving energy efficiency, but they can create a more productive and conducive work environment to win in the war for talent."
"As the office pivots to a place of collaboration and ideation, companies are embarking on the journey of hybrid work by creating seamless virtual and physical experiences for their people. We can also expect a renewed commitment to spending on sustainability, along with the continual evolution of the office, to enhance the overall employee experience," concluded Hinge.
To download the Asia Pacific Fit-Out Cost Guide 2021/2022, 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 $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.