These Markets Top the List for Office Fit-Out Costs
With new construction at historic lows, JLL anticipates a greater focus on lease renewals and building upgrades this year.
Build-out costs for office space are the most expensive in New York City, with other U.S. markets also relatively expensive compared to many other parts of the world, according to JLL’s global office fit-out costs report.
Other pricey U.S. office space build-out markets include San Francisco, Boston, Chicago, Los Angeles, Seattle and Philadelphia, all of which are more expensive in that regard than any other market worldwide.
The most expensive non-U.S. office market for build-outs is Zurich, which edged out London and Munich. The least expensive U.S. market for build-outs is Dallas, according to the report, whose costs are lower (for example) than Dubai or Tokyo.
Build-out costs are rising everywhere, however, JLL reported. Cost increases over the last 12 months have been driven by inflation, material costs and currency volatility. Three-quarters of office markets reported increases in raw material prices, and half have experienced labor shortages that have pumped up construction costs.
The report analyzed data from 68 cities in 40 countries, finding that build-out costs—which the report terms fit-out—for office space is relatively high in the U.S. and Canada, but also such places as the U.K., Switzerland, Saudi Arabia and the UAE, as well as Singapore and Japan.
In North America, the average build-out cost is $3,070 per square meter (about $287 per square foot), compared to the global average of $1,830 per square meter (about $171 per square foot), the report noted.
Sustainable space in demand
Despite efforts to roll back green building initiatives at the federal level in the U.S., demand for sustainable build-outs is on the rise, the report found, with 60 percent of markets surveyed reporting an increase in client inquiries for a more sustainable build-out in the last 12 months.
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Mechanical and electrical services make up a large part of sustainable build-out costs, accounting for an average of 29 percent of total build-out expenses. Some regions report them to represent as much as half of costs.
Even so, research suggests that investing in upgrades to M&E services can save between 10 percent to 40 operational energy costs, JLL reported.
“Investing in energy-efficient components throughout fit-outs and engaging with sustainability experts early in the project planning process can also help ensure sustainability requirements and costs are considered as part of the decision-making process, reducing the risk of late additions or changes to meet sustainability needs,” the report explains.
Overall, the report finds optimism about the future of office space, but also potential hurdles to successful build-out projects, including the aforementioned higher costs, but also economic and political uncertainty, largely driven by the potential implications of trade and tariffs.
With office development and new construction at record lows, JLL anticipates the focus will shift toward lease renewals and enhancing existing buildings over the next 12 months.
Early planning for lease ends and decisive investment in property upgrades will benefit both landlords and occupiers, according to the report.
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