Bangkok ranks as 7th most affordable office market to fit out in Asia Pacific
Fit-out costs in the city are expected to remain stable in 2021.
According to Asia Pacific Fit-Out Cost Guide 2020/2021 by real estate consultancy JLL, Tokyo ranks as the most expensive office market to fit out at USD1,927 per sqm for the fourth consecutive year, compared to the regional average of USD1,001. Bangkok is the region’s 7th most affordable office market to fit out at USD713 per sqm, 170% less expensive than Tokyo and only 13.4% more expensive than the lowest cost market for office fit-out in Asia Pacific -- Ahmedabad, India (USD617).
“Despite price competition among construction service providers and contractors, fit-out costs in Bangkok have stayed relatively stable. However, reinstatement costs have increased due to rising material costs in this traditionally low margin segment,” says Stephen Taylor, Managing Director of Project & Development Services at JLL in Thailand.
Many tenants are renewing leases, downsizing and partially returning leased space which requires reinstatement work to be done outside normal working hours, another factor in higher reinstatement costs.
“We expect these trends to continue into 2021,” Mr. Taylor adds.
Fitting out offices in most of key office markets in Asia Pacific will cost more in 2021
JLL’s report 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.
In 2021, organisations should expect to pay more to redesign or upgrade their workspaces even while many are trying to decrease capital expenditure (capex) due to the financial impact of the pandemic, says JLL.
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.”
Employers remain committed to reimagine workspaces
Despite overall rising costs, JLL believes this will not deter most companies from investing in safe and productive work environments for their employees. The firm reveals that while organisations 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.
“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,” says Mr. Hinge.
“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 work place and make choices about where and how they work, so I believe investing in a flexible environment pays back in terms of employee engagement,” he adds.
Costs vary throughout the region
Precipitated by the ongoing construction boom and labour shortage, Tokyo ranks as the most expensive office market to fit out for the fourth consecutive year. Price increments are expected in Brisbane, Singapore, Beijing, Shanghai, Guangzhou and most Indian cities in 2021, as constraints like access to labour, 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.
Mr. Hinge comments “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.”
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.