Hong Kong’s office fit-out costs to increase next year as businesses regain confidence after recovering from Covid-19 pandemic

The average cost of fitting out an office in Hong Kong jumped 9 per cent this year compared with last year
Hong Kong ranked ninth in office fit-out costs in Asia-Pacific this year, while Tokyo topped the list

News from SCMP – updated: 2:02pm, 22 Dec, 2021

The average cost of fitting out an office in Hong Kong has rebounded to pre-Covid-19 levels and is expected to increase further next year because of rising business confidence as the city overcomes its worst economic recession, according to JLL.

The cost of designing and building workspaces jumped 9 per cent to HK$935 (US$120) per square foot this year after dropping in 2020, the real estate consultancy said in its Asia-Pacific fit-out cost guide for 2021-22. No projections were provided for next year.

“The market has recovered and resumed to normal as the pandemic is contained and companies’ confidence towards the business outlook has increased,” said Ryan Wong, head of project and development services at JLL in Hong Kong. “This has supported contractor pricing.”

Among Asia-Pacific markets, Hong Kong ranked ninth in office fit-out costs, the same as last year. Tokyo was the most expensive at HK$1,381 per sq ft, while Ahmedabad in India was the cheapest at HK$484 per sq ft.

Fit-out costs across the region rose 10.8 per cent year on year, mainly as a result of the impact of the pandemic, which led to supply chain disruptions, labour shortages and increased costs for raw materials, according to the report.

Looking ahead, JLL predicts costs will continue to increase, especially in cities that rely heavily on foreign labour and imported materials.

“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,” said Martin Hinge, executive managing director of project development services at JLL Asia Pacific.

In Hong Kong, costs are expected to be driven by the continued mitigation of the pandemic, and a further boost to the economy from the easing of Covid-19 measures and recovery in global trade.

Additionally, surveys show Hong Kong workers can expect higher salary increases next year, which are likely apply to labour costs and thus push up the cost of office construction and renovation.

Despite the predicted increase in expenses, office design and building remain on companies agenda next year, according to JLL.

The top three areas corporate leaders have earmarked for investment in 2022 were technology and audio-visual tools, mechanical and electrical facilities, and sustainability features, such as rooftop gardens, indoor greenery and water conservation.

“Building an office in a sustainable and responsible way creates upfront value for companies,” Hinge said. “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.”