Asia Pacific’s post-pandemic office: more expensive to build, but as important as ever

• Japan cities the most expensive to fit out in Asia Pacific; regional average increase 17 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 Project & Development Services Fit Out Guide, but major occupiers are absorbing the higher spend in their quest to improve return-to-office rates. 

Asia Pacific Head of Insight and Analysis and co-author of the report Dr Dominic Brown said that while fit out costs were up across the region by an average of 17 percent in local currency (6 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’  style, with only Auckland, New Zealand also appearing among the top five. Within the top 10, Hong Kong was the only market outside of North Asia or Australia/New Zealand to feature.

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^{1 A mid-point between a traditional office with one-to-one workstations and limited other spaces and an advanced, post-pandemic destination office characterized by majority non-assigned workstations and a variety of collaborative and lifestyle zones.}

_{Fig 1: Top 10 most expensive locations for a part-hybrid fit-out in Asia Pacific.}

Cushman & Wakefield’s Head of Project & Development Services business Tom Gibson said despite higher costs and constraints on capital expenditure, the conversation with occupiers remained focused on the changing working environment:

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 increasingly wanting to create destination offices for their employees. ‘Destination’ means different things to different companies – it could be creating a hospitality feel, or more social spaces – but ultimately, it is about creating a ‘stickiness’ that makes people want to come to work.”

Cushman & Wakefield Korea’s Head of Project & Development Services Jaehong Lee said “The needs for technology are getting higher for accommodating the ABW office. So the portion of technology in total project cost is around 30%, which is 10% increased portion comparing last couple of years.”

Extended report format better reflects more complex client needs
In addition to fit out costs, the report showed larger percentage increases for reinstatement and retrofit costs, although it noted that these were off a much lower base than fit out costs.

The report also contained sections on sustainability, technology, procurement, and workplace strategy and change management to better assist clients considering a fit out.

“Real estate decisions used to be made by only a handful of people within an organization. Now we see a more collaborative approach across business functions, with more emphasis on employee needs. Our conversations with clients are now about human resources as much as they are about construction.”