HK Office Fit-out Costs Likely To Fall After China Border Reopens
HONG KONG – Following a recent report that showed the Chinese territory being the 5th most expensive market for office fit-out costs in Asia Pacific, Cushman & Wakefield (C&W) expects the costs to return to pre-COVID levels once borders with mainland China are reopened, reported the South China Morning Post on Tuesday morning (19 April, SGT).
According to the real estate consultancy, once borders with mainland China are reopened, it would enable smoother transport of construction materials. This is because office developments in Hong Kong faced higher costs during the COVID-19 pandemic due to disruptions of deliveries of construction materials from mainland China, revealed to Bryant Cheung, Bryant Cheung, Senior director at C&W.
“The delivery of non-essential supplies was suspended between January and March, including building materials, which has increased logistical costs,” he noted. Cheung also added that some construction materials from neighbouring Shenzhen had to be transported by sea due to curbs on land links.
“Hong Kong’s supplier of building materials is mainland China, so there will always be added costs for (local office renovations), such as taxes and logistics,” he explained, adding that salaries are also higher in the Chinese territory.
Nonetheless, C&W believes the rise in costs is temporary and will fall as border restrictions are relaxed. “When the borders are reopened, allowing for the smooth transport of supplies, additional costs will fall,” Cheung said.
Cushman’s evaluation of office fit-out costs includes the cost of furniture, IT equipment, security devices, as well as mechanical and electrical systems, which are typically borne by the office space tenant.
Moreover, CBRE’s Senior Director in Hong Kong Admen Law shared that the higher fit-out costs is due to the increasing demand for coworking spaces and flexible office spaces, which are more expensive to build or renovate.
“The trend emerged around five years ago, and was accelerated by the pandemic. Companies saw the benefits of having a flexible working environment, such as saving on rental expenses and reducing office footprint,” explained Law, who estimated that office fit-out costs rose 3 percent to 5 percent during the pandemic.