Fit out costs rise in Asia Pacific, Tokyo remains priciest

Cushman & Wakefield's 2025 Fit Out Cost Guide indicates a continued rise in the cost of fitting out offices in key locations across the Asia Pacific, albeit at a decelerating pace.

The report from the global real estate services firm highlights a range of fit out costs, from USD $195 per square foot in Tokyo to USD $58 in Jakarta. Japanese cities remain the most costly for office fit outs, whereas Southeast Asian cities are the most affordable.

The conversion of fit out costs into US dollars reflects minor market shifts, with Hong Kong moving from ninth to fifth most expensive, passing cities like Auckland, Seoul, Sydney, and Melbourne. This shift is attributed to the strong US dollar to which Hong Kong's currency is tied. Manila also climbed the rankings from 20th place to share 17th with Shanghai, surpassing Chinese cities Shenzhen and Guangzhou, where costs fell. Jakarta has become the region's most affordable fit out destination, dropping from 24th to 33rd, as demand shifted to low-spec fits, overtaking Ho Chi Minh City, last year's most affordable location.

Dr Dominic Brown, Head of International Research, EMEA & APAC at Cushman & Wakefield, attributed local fit out costs alignment to market-specific economic outlooks and related office leasing activities. "As a region, Asia Pacific is one of the more expansionary, and we have seen more growth and slightly more positive sentiment about the market by contractors here than in other regions," he stated. "Measured by both contractor sentiment and actual cost, it appears that the worst of the pricing pressure from recent years has resolved and prices for raw materials are on the way down, while tight labour markets continue to drive some wage inflation."

Tom Gibson, Asia Pacific Head of Project & Development Services, remarked, "We have seen an uptick in retrofit and upgrade activity across the region as more clients opt for lease renewals over relocations. In almost all cases, the employee experience remains a key focus for occupiers, with these higher quality fit outs continuing to place upward pressure on costs in most markets."

The report specifies that North Asian cities, including Tokyo, Seoul, and Osaka, experienced the highest fit out cost inflation at about 16%, followed by Australian cities at 11%. Jakarta saw a significant cost decrease by 16%, and Chinese mainland cities also reported cost reductions, whereas India observed steady inflation around 3%.

In Australia and New Zealand, the guide anticipates a stabilisation in fit out costs, with Sydney and Melbourne continuing as the most expensive cities for office fit outs due to their positions as central business hubs. "Australian fit out costs are up 10% y-o-y (in local currency), but stable in USD and we anticipate a moderate increase in capital expenditure budgets to accommodate evolving workplace strategies throughout the year," noted Mitch Wilson, Head of Project & Development Services for Australia and New Zealand at Cushman & Wakefield. "Sydney and Melbourne continue to lead in fit out costs within Australia, reflecting their status as key business hubs. Companies should plan for higher expenditures in these cities, especially for advanced hybrid workspaces."

The Australian office market is anticipated to see stronger growth in 2025 compared to 2024, driven by an increased demand for high-quality office spaces that support hybrid working models. A contractor sentiment survey indicated that 96% of companies expect pricing to remain stable or slightly increase over the next six months. Labor and materials costs are similarly expected to be stable or see slight increases.

For New Zealand, Todd Hanrahan, Head of Project & Development Services, stated that last year saw a 14% rise in fit out costs for Auckland, which remains the most costly city in New Zealand for office fit outs due to high demand and limited supply. Expected trends indicate that careful budget planning will be required as labor costs slightly rise, extending into 2025 as the market recovers with cautious investor and occupier spending.