We may be over the worst of the rising inflation and interest rate cycle, but corporate tenants in Australia and New Zealand who want to persuade their workers to come back to the office with better, more attractive fitouts need to brace for rising costs, according to a new report from Cushman & Wakefield. Especially in Australia.
The latest Fitout Cost Guide 2024 from Cushman & Wakefield found that leading cities in these two countries – Canberra, Auckland, Sydney, Melbourne and Brisbane – took out five of the top 10 list for most expensive average fitout costs on a square metre basis.
Partly, the guide says, this is a supply chain issue thanks to the disruptions of the past few years – factors that are not going to disappear any time soon judging by the most recent geo-political tensions threatening further disruptions to the importing of materials.
Globally it’s an interesting picture.
Mitch Wilson, Cushman & Wakefield’s Head of Project & Development Services Australia & New Zealand said “As Sydney and Melbourne secure their positions as the 7th and 8th most expensive locations for collaborative hybrid fit outs in the Asia Pacific region, it underscores the dynamic landscape of commercial real estate across Australia.
“Despite the challenges posed by interest rate hikes, geopolitical tensions, and economic volatility, the resilience of the global economy persists. These rankings reflect the intricate balance between demand for innovative workspaces and the ever-present pressures of cost and accessibility in two of Australia’s leading business hubs.”
In New Zealand there’s a similar story.
Todd Hanrahan, Head of Project & Development Services New Zealand emphasised that the country’s persistent ranking as the 5th most expensive location for hybrid fit outs in APAC underscores its dedication to quality and innovation in workplace design.
He highlighted the incorporation of highly coveted carbon-neutral buildings with exceptional interiors, which motivate the contemporary workforce to desire such environments, thus invigorating the fit-out market.
“This ranking reaffirms our status as a frontrunner in crafting modern, dynamic office spaces that prioritise functionality and employee well-being,” he said.
Strong drivers for good fitouts
Regardless of costs there are strong drivers to improved fitouts.
Hybrid working is one big trend that is attracting many corporates and organisations to the drawing boards of interior fitout architects and designers.
Companies may need to downsize because they don’t need as much space with staff working from home – but they also need to think about what kind of fitout can attract staff back to the office and drive productivity and innovation.
Innovation and productivity
The biggest shifts in business, demographics and worker preferences start with the need for business to continually innovate and generate greater productivity, the guide says.
Office fitout can be key to these outcomes.
First, workspaces that are interesting, high quality and geared to collaborative working signal the kind of output and productivity expected of the company or organisation’s employee.
But they also signal concern for employee wellbeing.
This can help in the perennial “war for talent”.
If a business is mostly comprised of its people, which can cost far more than rent and fitout, then it makes sense for employers to invest in what their staff care about.
A high quality and sustainable fitout also signals that an employer cares about staff and their wellbeing. It can demonstrate if going to the office is worth the commute, and worth the effort of getting dressed and mentally prepared for a good day’s work.
Its capacity is to provide a space that’s interesting enough to keep staff engaged, challenged and ready to work with colleagues on great projects or breakthrough problem solving.
Wellness, creativity and productivity are key touchstones
A sustainable fitout can prove its credentials with ratings such as WELL, Fitwell and the US LEED ratings systems.
These zero in on a range of human centric needs – for air, light thermal systems as well as access to healthy food, green purchasing, the guide says.
The ratings dovetails well into today’s rising concern for corporates to prove they have good ESG (environmental, social and governance) credentials that appeal to their own investors, stakeholders and disclosure regimes from government.
Social impact is an element of ESG which will only grow in importance the guide says.
This means a focus on wellbeing and mental health and environmental inclusions are a great way to do this.
Green spaces have continually been proven to drive superior outcomes including higher cognitive performance, lower levels of sickness, higher productivity and greater creativity,” the guide points out.
And diversity is key. Not just to meet demand for different types of work but to meet the variety of human needs for different patterns of work behaviour, neurodiversity and personality differences.
These approaches go beyond diversity and equity, the guide says, and extend to “belonging”.
And they signal to young people who are increasingly eco-aware and socially aware that their company is aligned to their values.
View the guide here: https://www.cushmanwakefield.com/en/australia/insights/office-fit-out-cost-guide
Four Australian cities and Auckland in New Zealand made the top 10 list for most expensive fitout costs globally.
| PSF) | PSM | ||
| RANK | CITY | AVERAGE COST (USD PSM) | AVERAGE COST USD |
| 1 | Tokyo | 199 | 2,142 |
| 2 | Osaka | 195 | 2,099 |
| 3 | Nagoya | 191 | 2,0556 |
| 4 | Canberra | 172 | 1,851 |
| 5 | Auckland | 158 | 1,701 |
| 6 | Seoul | 156 | 1,679 |
| 7 | Sydney | 153 | 1,647 |