The cost to fit out a new office in Hong Kong is cheaper than six major Japanese or Australian cities, a new study shows. That is a small consolation for prospective tenants in a city with the highest rentals in the past four years.
At US$130 per square foot, Hong Kong ranks seventh among 28 gateway cities in Asia-Pacific region, according to the inaugural fit-out guide published by Chicago-based property consultancy Cushman & Wakefield. This works out to be 35.6 per cent lower than US$202 in Tokyo, and 16 per cent below US$154 in Sydney, the ranking shows. At US$70 per square foot, Taipei is the most economical of the lot.
“Cheaper labour cost, furniture, fixtures and equipment, and construction materials are the main drivers for lower office fit-out costs in Hong Kong” compared with those in Japan and Australia, said Tom Gibson, managing director of project & development services.
Hong Kong holds the unenviable record as the most expensive city for office space, where rents in prime buildings in Central districts have topped any city in the world for a fourth straight year, US real estate services group CBRE said in June. Supply shortage, and demand from banks and mainland Chinese companies, have pushed up rentals in recent years.
The Cushman & Wakefield guide aims to help office occupiers define their capital planning and relocation budgets. It includes a cost breakdown on components such as furniture, mechanical and electrical works, builder works and audiovisual/information technology, while taking into consideration the reinstatement cost in Asia-Pacific.
“Builders’ works is still the most expensive component in new office fit-out projects,” said Bryant Cheung, director and head of project & development services in Hong Kong at Cushman & Wakefield.
“However, the cost of AV/IT technology has soared considerably, given the rise of remote working, virtual conferencing and co-working places.”
In Hong Kong, builder works account for 35 per cent of all-in costs, while mechanical and electrical works amount to 31 per cent. Furniture amounts to 18 per cent and AV/IT equipment 10 per cent, the Cushman & Wakefield report shows.
A company leasing 30,000 square feet of Grade A corporate office in Hong Kong would typically need to invest US$33.5 million in total over a five-year period, according to a separate CBRE report in October, which also ranked Tokyo and Sydney above Hong Kong in fit-out costs. Rents would account for 80 per cent of the bills while fit-out costs are estimated at 15 per cent over the tenure.
The fit-out costs in Tokyo is elevated because Japanese landlords tend to have “nominated contractors” to undertake the fitting works, according to Mak Yiu Chi, senior director of cost management at JLL in Asia-Pacific. Hence, “the cost is not the most competitive” and may worsen on labour supply crunch going into the Summer Olympics next year, she added.
In Hong Kong, Mak does not expect JLL’s clients to trim their office renovation budgets because more and more companies are emphasising on wellness programmes and facilities in their offices, she said.
“There is an increasing trend among our clients and companies to offer employees and clients across the board a greater feeling of hospitality in the workplace,” Mak said. Most employers are competing with global tech firms for talents, so they see the need to catch up in fitting out their offices to support the new work culture, she added.
More from South China Morning Post:
- Cooling measures could lead to Hong Kong property market ‘free fall’ after a downturn, consultants JLL warn
- Do overpriced Hong Kong parking spaces make for smart investments?
This article Hong Kong is cheaper than Tokyo and Sydney in office fit-out costs, study shows first appeared on South China Morning Post