APAC Office Fit Out Cost Guide 2023

ASIA PACIFIC OFFICE FIT OUT COST GUIDE 2023

A FOCUS ON PRICING

Furthermore, labour markets remain tight. Across the region’s 14 major markets, over half are at or below average unemployment rates from the 2019 period, while the remainder are less the 70 basis points above that reference period. The situation is forecast to only change modestly over the year ahead, which will keep pressure on labour availability and wage pricing. Indeed, this is where there remains significant cost pressure with real wage increases (accounting for inflation) increasing year-on-year by up to 9% in 2022 and 10% in 2023. In line with this, fit out costs across the region have risen by an average 18% in local currency but just 7% in U.S. dollar terms, mainly as a result of the recent strength of the U.S. dollar. Larger percentage increases are seen for reinstatement and retrofit costs, but these are off a much lower base. It should be noted that these figures are an average across the region and considerable variability exists at the market (and individual project) level. However, there has been positive impact – while fit out costs in Indian rupees have increased year-on-year, in U.S. dollar terms, costs have actually decreased (by circa 4%), further underscoring the attractiveness of the market.

Throughout 2022, inflation has proven to be more persistent tha n many economists originally envisaged. This has inevitably forced pricing higher, with sharp increases in fuel costs being one of the main underlying drivers as increased transport costs have added to pricing all along supply chains. For the most part, prices for key commodities have declined from their peaks – global oil prices are down approximately 20% from June 2022, though energy pricing is down marginally less. Metals pricing (including aluminium, copper, tin and lead) are down by a similar 23% in aggregate, while timber pricing has eased 14%. Perhaps more tellingly, the Baltic Dry Index, which is a measure of the cost to bulk-transport dry materials, has eased 59% from its 2021 peaks, which has become evident in shipping costs from the east coast of the U.S. to East Asia and from Europe to East Asia declining by approximately 52% and 55% respectively from their peaks. Notwithstanding this welcome relief, the majority of pricing still remains above longer-run averages (Figure 2).

There has been positive impact – while fit out costs in Indian rupees have increased year-on year, in U.S. dollar terms, costs have actually decreased (by circa 4%), further underscoring the attractiveness of the market.

FIGURE 2:

INDEXED MATERIAL PRICING (Q4 2019 = 100)

250

200

Energy

150

Oil Metals

100

50

0

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Source: Moody’s Analytics

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Cushman & Wakefield

Cushman & Wakefield Seoul Office