With people returning to work, workplaces are being modified to ensure de-densification and incorporation of touchless technologies to ensure a safe and healthy workplace. It is due to this reason that firms are expected to pay more to redesign or upgrade their workspaces in 2021, even while many are trying to decrease capital expenditure (capex) due to the financial impact of the pandemic, according to a report by real estate consultancy JLL.
The firm’s Asia Pacific Fit-Out Cost Guide 2020/2021 reveals that the average fit-out cost rose 4.7% year-on-year across the region, with labour shortages, health and safety considerations, material availability, and higher delivery costs as the main price drivers.
Indian cities experienced a sharp increase in construction costs in Q2 2020 as material costs, particularly imported M&E materials or specialist trades such as joinery, suffered from shortages and there was a preference to source from the first available vendor irrespective of price. This started to ease in Q3 2020 and is expected to ease further in Q4.
Further, health and safety has been a cost driver in 2020, although partially offset in many markets by aggressive pricing by contractors at tender stage. The direct cost of these measures varies across the region, but considerations include stringent sanitation, quarantine facilities, thermal imaging scanners and PPE on large campus developments in India.
“The construction industry in India, the 2nd largest employer after agriculture, has seen a major impact of the pandemic on the fit-out and construction projects. India’s largely migrant workforce saw a major exodus in Q1 and Q2 leading to labour shortages and disruption in the supply chain. The situation eased considerably in Q3 and Q4. However, the impact on productivity and extended project timelines are driving costs up,” said MV Harish, Managing Director, Projects & Development Services – India and and Sri Lanka, JLL.
Employers remain committed to re (imagine) workspaces
Despite overall rising costs, JLL believes this will not deter most companies from investing in safe and productive work environments for their employees. The firm reveals that while organisations may be re-examining their real estate footprint, workspaces still play an integral role in preserving a company’s corporate culture, as well as to recruit and retain talent.
“A majority of the Indian workforce has been working from home since March, which has led organizations to review and optimize portfolios to mitigate the financial impact of the pandemic on their business. With people returning to work, workplaces are being modified to ensure de-densification and incorporation of touchless technologies to ensure a safe and healthy workplace,” he added.
“As employee health and well being take center stage, hybrid working models which encompass work-from-home to work-from-office stints require companies to come up with innovative strategies to ensure that the workplaces can be used to boost productivity and efficiency. As the focus shifts from human experience to human engagement, flexible working models will see an adoption like never before,” he said.
The report tracks the average fit-out costs for eight major cities in India from Delhi (64 dollars per sq ft) to Ahmedabad (57 dollars per sq ft).
The office fit-out landscape continues to evolve amid the COVID-19 pandemic but fit-out costs in Asia Pacific remained relatively resilient in 2020. India is projected to see a 10 percent contraction in its economy this year and demand stalled mid-pandemic with restrictions implemented countrywide, it said.
Activity has begun to pick up in key markets and occupiers that had delayed decision making have started to finalise deals. Prices of fitting out offices will continue to increase in 2021 in India, it said.
Costs vary throughout region
Precipitated by the ongoing construction boom and labour shortage, Tokyo ranks as the most expensive office market to fit out at 179 dollars per sq ft for the fourth consecutive year, compared to the regional average of 93 dollars.
Elsewhere, price increments are expected in Brisbane, Singapore, Beijing, Shanghai, Guangzhou and most Indian cities in 2021, as constraints like access to labor, reliance on imported materials and delayed completion dates continue to pose challenges.
Meanwhile, Auckland, Bangkok, Manila, Seoul and Taipei may see fit-out costs stabilising or even dipping slightly, as many construction service providers and contractors have resorted to reducing overall margins.
(Source: Moneycontrol)
