Sydney has overtaken Tokyo as the most expensive market in Asia Pacific for office fit-outs for the first time in five years.

New JLL research found that Australian organisations were paying more to fit out their offices this year, as inflation and supply chain disruption continued to have an impact.

The average fit-out cost in Australia was $2,662 per sqm, a 14.84% increase year-on-year.

Sydney was the most expensive city for a fit-out in the country, at $2,765.

Canberra ($2,761) and Adelaide ($2,703) are close behind, followed by Melbourne ($2,676), Brisbane ($2,554) and Perth ($2,522).

Average prices ranged from $1,997 per sqm for a base specification open floor plan with no enclosed offices, to $4,624 per sqm for a high specification traditional office.

Builders’ labour accounts for the highest proportion (43%) of fit-out costs, while mechanical and electrical work remain the second largest component of costs (26%).

“Across the country, strong client sentiment has driven an increase in project volume over the last 12 months which, in conjunction with regional and global headwinds, have led to significant inflationary pressure on construction and office fit-out costs,” Scott McCrossin, JLL’s Managing Director, Project and Development Services said.

“Measures to rein in costs have been slowed by global headwinds such as ongoing geopolitical tensions exacerbating the cost of energy and constraining supply chains already under pressure. Damage from weather events – such as flooding in many regions of Australia in 2022 – have further stressed construction costs.”

The availability of skilled and semi-skilled labour has had a mixed impact across Asia Pacific.

Australia, which is already facing a tight labour market, is feeling the pressure as project volumes soar beyond pre-pandemic levels.

“Since early 2020, the pandemic has impacted clients buying design and construction services in the Australian construction market, impacting fit-out costs through labour and supply chain factors both globally and locally,” McCrossin said.

“As Australia adjusts to a post-pandemic environment, shortages of skilled resources, material price increases and supply chain disruption continue to contribute to significant price inflation across the country.”

JLL anticipates that despite the price increases, companies will continue to invest in better quality, sustainable and employee-focused workplaces.

“COVID-19 supercharged changes already underway: we have seen a rapid shift in workplace behaviours and how our clients envision their offices,” McCrossin said.

“We have seen sustained investment in technology to support the accelerated adoption of dynamic and flexible working. These developments reflect a reimagination of the role of the office as our clients invest in initiatives to drive collaboration, attract and retain talent, and enhance physical and mental health and wellbeing. Investment in high-quality space also serves to bolster environmental sustainability goals.

“Pricing volatility in Australia reflects the interdependencies of a global marketplace. Consequently, fit-out costs over the past year have remained high across Australia. We expect these factors to continue to drive current levels of construction price inflation over the next 12 months, before starting to moderate towards the end of 2023.”