- Canberra ranks as the fourth most expensive city for office fit-outs
- Tight labour, inflation and supply chain disruptions have led to the increased costs
- A high American dollar is also contributing to higher costs across Asia
Canberra is now one of the most expensive locations in the world to fit out a new office according to a new report from Cushman & Wakefield.
Inflation, tight labour markets, and supply chain disruptions have significantly impacted the cost of office fit-outs in Australia, with the average fit-out cost having jumped 16% in the past 12 months.
Canberra reported average fit-out costs of $2,592 per square metre, ahead of Sydney, Melbourne, Brisbane, Adelaide and Perth. The Australian capital ranked fourth among all major cities across the Asia-Pacific (APAC) region, only behind Tokyo, Osaka and Nagoya. Sydney came in seventh place in the APAC rankings, while Melbourne ranked as the eighth most expensive.
Costs have risen
Cushman & Wakefield’s report found the ongoing challenges faced in the worldwide economic landscape, including the impacts of lockdowns, macro-economic pressures and heightened geopolitical issues stemming from Europe have driven costs up. Despite these challenges, many companies have adopted hybrid working models in response to employee expectations for increased workplace flexibility.
The report also highlights the importance of office space in contributing to a company’s financial, social and sustainability goals, as well as reflecting corporate brand and culture.
Office fit-out costs in the region have been influenced by several factors, including increased transport costs, sharp increases in fuel costs and tight labour markets. The report notes that over half of the 14 major markets in the region have unemployment rates at or below average levels from 2019, while the remainder are less than 70 basis points above that reference period.
“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,” the report said.
Rising USD hurting
In light of these challenges, fit-out costs across the Asia-Pacific region have risen by an average of 18% in local currency but just 7% in U.S. dollar terms, primarily due to the recent strength of the U.S. dollar.
The report also highlighted the importance of understanding the impacts of these economic factors on the office market and said occupiers need to consider capital planning and relocation budgets carefully. It also suggests that the current market conditions might provide a window of opportunity for occupiers to capitalise on softer market conditions before stronger growth resumes.
