The global pandemic created challenges in the supply chain, which impacted timeliness and increased the cost of obtaining goods in some cases. Conversely, recessions typically have downward pressure on contractor pricing—as they get more aggressive to win the limited number of projects occurring—and on labor costs.
To inform our clients of the changes in office tenant improvement costs, Cushman & Wakefield’s Project & Development Services team prepared a set of typical fit out plans and asked local partners in 45 markets across the United States, Mexico, Latin America and Canada to price the work. The results were analyzed to understand variations in pricing and approach. Key findings include:
- Activity is down in the wake of the pandemic / recession.
- North American leasing in 2020 was 35% below its 10-year average.
- The under construction pipeline declined 7.5%.
- Tenant improvement prices have remained steady, driven by decreases in profitability rather than drops in costs.
- Commodity prices (such as copper and lumber) have risen, and will likely climb into 2022 as demand resumes.
- Copper prices increased 22% in 2020, and the 2021 increase is forecasted at 11%.
- Lumber prices increased 37% in 2020, and the 2021 increase is forecasted at 5%.
- Pent up demand may lead to increased tenant improvement activity in the second half of 2021.
- Corporate capital spending is up 6.6% YoY.
- Venture capital funding was up in 2020. There has historically been a correlation between VC funding and tech leasing. This was not true in 2020 as occupiers were reticent to lease new space, which may lead to pent-up demand for new space and build outs when those companies do return to the office and deploy raised capital.
The enclosed cost data is representative of hard costs only and does not reflect the total project costs. Soft costs, furniture, fixtures and equipment, and other costs should be additive to the cost data included.
The construction market on a global basis has seen great fluctuation in materials, commodities, labor and supply chain. The values included herein are based on local contracting data that may have changed from the time of publishing due to rapidly evolving impacts of the pandemic. Please contact your local Cushman & Wakefield Project & Development Services professional for real time updates regarding the specifics of your project requirements.