ASIA PACIFIC OCCUPIERS' FIT-OUT COST GUIDE

ASIA PACIFIC OCCUPIERS’ FIT-OUT COST GUIDE GLOBAL WORKPLACE SOLUTIONS 2015

CBRE PROJECT MANAGEMENT | ASIA PACIFIC OCCUPIER’S FIT-OUT COST GUIDE

FOREWORD What solution will provide me with the best value?

VALUE-DRIVEN CAPITAL ALLOCATION The 2014 Cost Guide was presented to more than 100 corporations in APAC and distributed to hundreds more. The extremely positive response encouraged us to further enhance the guide for 2015 publication. In the 2015 edition we have addressed the increasing trend for Activity-Based Working (ABW), through modelling of alternative design concepts to better address the question “What solution will provide me with the best value?” We have also incorporated changes in currency levels that may impact how occupiers’ decide to allocate capital across the region. We are always looking at ways to further improve this guide, so please let us have your feedback!

Martin Woods Senior Managing Director, Asia Pacific CBRE Project Management

1

CBRE PROJECT MANAGEMENT | ASIA PACIFIC OCCUPIERS’ FIT-OUT COST GUIDE 2015

2


CONTENTS INTRODUCTION 5 2015 VS 2014 COST INDEX

6

CLIENT COST BENCHMARKING

10

LEASING & FIT-OUT

16

NEW WAYS OF WORKING

18

REGIONAL COST ANALYSIS

32

3


MACRO-ECONOMIC FACTORS Driving Dramatic Shifts Currency Volatility %

Inflation Impact

2015-2017

3.9%

-25.2% -0.7% 0.0%

1.5% 0.1%

-7.3% -19.4%

-55.9%

-14.5%

-10.3% -2.2% -2.2% -4.0%

1.9% 2.5%

Australia

1.3% 2.0%

China

2.3% 3.5%

Hong Kong

5.4% 6.7%

India 5.8%

-36.8%

6.7% 6.4%

Indonesia 0.3%

Japan 4.0% 4.0% 3.9%

5.8%

2015 2014

2.6% 3.5%

Asia Pacific

2012-2014

2.0% 3.1%

Malaysia

2.3%

Philippines Singapore

4.2% -0.5%

Taiwan

-6.0% -1.6%

Vietnam

1.0% 0.9% 1.3%

South Korea

-1.0% -4.3%

2.7%

-0.5%

1.2% 2.2%

4.1%

Source: CBRE Asia Pacific Research Jun 2015

Currency devaluation has had a negative impact on existing investors but can provide opportunities for potential international investors as it enables them to invest in countries with lower exchange rates and at a cheaper price.

4


INTRODUCTION Fitout, Leasing

New workplace solutions not only offer the ability to create vibrant and high performance workplaces, but when carefully conceived they can cost the same or less than traditional solutions.

2016: 2014 Fit-out Cost

2015 Fit-out, Leasing & ABW options

g

2016 Life Cycle Costing

CBRE was delighted with the positive client feedback following the release of the 2014 cost guide. The evolution into the 2015 addition was driven by the demand and maturing needs of clients beyond simple cost to alternatives to traditional workplace emphasizing productivity and value. In this edition, CBRE has introduced “New Ways of Working” and developed options that have been priced compared to present a complete Project Solution to clients that can provide a tangible and solid foundation for project decisions. The 2014 Cost Guide was the first of a three part series. The 2nd Edition not only introduces “New Ways of Working”, but also lease cost for Grade A office space that has been cost compared and indexed in a similar manner to the project CAPEX. This provides clients with a total cost estimate for new office relocations including project CAPEX and initial 12 month leasing costs. This document assists our clients in making major commercial decisions as well as guiding the development of cost effective solutions. Looking forward; the next edition due to be released in 2016 will also consider Life Cycle Costing (LCC) from day 1 to the lease run-out date.

Guide Assumptions • The commercial tower is a Grade A office building defined as

occupying a prime location in the Central Business District with a modern flexible layout and column free floor plates in excess of 15,000 square feet, the total floor area is at least 300,000 square feet with sheltered parking GFA ratio of 1/2000, with excellent accessibility to public transport and attracts premiere office users.

• The fit out size assumed to between 25,000 to 30,000 square feet.

• The fit out cost does not consider building abnormalities

or variances based on fit factor such as onerous landlord requirements or densities outside the range 1 person to every 90 to 110 sq ft.

• Construction cost includes all soft and hard costs and standard office FF&E requirements.

5


2015 VS 2014 COST INDEX

Foreign currency fluctuations have little effect on local business growth for both domestic and long established foreign companies generating revenue in the local market. Zac Zdravev Senior Director, Asia Pacific CBRE Project Management Global Leadership & Platform

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Tokyo Hyderabad

1.27

Sydney

1.23

Bangalore

Seoul

1.22

Mumbai

0.56

0.49

1.12

0.60 0.76

HCMC

1.11 Singapore

0.87

Taipei

Hong Kong

1.07

0.88 Manila

2014 Cost Index

Guangzhou

1.04 0.98

1.00

Jakarta

Beijing

1.00

Kuala Lumpur Shanghai

Seoul Hyderabad

Hong Kong

1.21

1.13

Bangalore Mumbai

2015 Cost Index

0.54

Beijing

1.02

0.49

1.01

0.59 HCMC

1.01

0.75 0.75

Jakarta

1.00

0.81 Taipei

Tokyo

0.83

Sydney

Shanghai

0.98 0.83 0.87

Bangkok

Guangzhou

0.89

Singapore Manila

Kuala Lumpur

The normalization of the regional costs to the US dollar caused a far more dramatic impact than the inflationary changes in the respective locations, making some cities more attractive to first-time foreign investments. Royston Toh Operations Manager, Asia Pacific CBRE Project Management

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COST BENCHMARKING TABLE REGION

COUNTRY

CITY

BASIC US$/SQ.FT

MEDIUM US$/SQ.FT

HIGH US$/SQ.FT.

North Asia

South Korea

Seoul

96

135

175

Japan

Tokyo

73

107

159

China

Beijing

72

106

163

Shanghai

74

104

158

Guangzhou

74

103

152

Taiwan

Taipei

67

89

117

Hong Kong

Hong Kong

82

122

176

India

Mumbai

47

66

84

Hyderabad/Kolkata/Pune

40

55

70

Bangalore/Chennai/Delhi

43

60

77

Philippines

Manila

49

89

141

Vietnam

HCMC

62

85

106

Indonesia

Jakarta

58

82

111

Singapore

Singapore

57

111

130

Thailand

Bangkok

49

89

141

Australia

Sydney

78

109

151

Greater China

South Asia

Southeast Asia

Pacific

The figures in the cost data table are generated from actual project financial close out figures for accuracy and for traditional workplace design. These figures reflect actual market conditions and may be adopted as a point of reference for future projects, considering inflation, local conditions and specific project requirements.

Warning! All prices have been developed to depict total project capital cost. In some countries however, particularly in the emerging markets, tenants will be required to fit out their office spaces from shell and core, this is considered separately.

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COST BREAKDOWN The capital cost is classified into 4 major categories namely, Furniture, M&E Works, Builder Works and Consultant Fees. Depending on the local market, these categories vary differently. However, with these percentages, it provides a better understanding on how the cost are spent by proportion in location. FURNITURE

Hong Kong

M&E WORKS

US$82 38 %

15

US$122 38 %

34 %

%

13%

36 %

33 % 21 %

8%

MEDIUM

HIGH

US$111

US$130

40 %

40 % 34

%

38 % 33

%

10 %

7%

BASIC

HIGH

US$104

US$158 41 %

38 %

35 % 28 %

29 %

28% 17 %

BASIC

6%

MEDIUM

US$74

20%

36 %

20%

20%

16%

35 %

10%

US$57

Shanghai

US$176

19 %

BASIC

Singapore

CONSULTANT FEES

BUILDER WORKS

20%

20% 14 %

MEDIUM

10 % HIGH

The figures in the cost data provided above are generated from actual project financial close out figures and for traditional workplace option 1.

9


CLIENT COST BENCHMARKING The cost benchmarking exercise had a very tangible benefits of realizing the comparative patterns on geographic locations where the client executed high/medium/low standard fit outs. This drove a deeper understanding of where our clients spent more/less in comparison to the market and identified several areas for further analysis and understanding.

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Stuart Ball Account Excellence Director, Asia Pacific CBRE Project Management


CBRE SYDNEY OFFICE

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APPLYING THE COST GUIDE Sample of client benchmarking exercise

FURNITURE

China

M&E WORKS

BUILDER WORKS

Note: Client build cost includes full IT costs of servers and monitors. In addition, the Client invested heavily in IT equipment and the cost made up almost 10% of the total project cost.

US$68

US$88

36 % 28

US$102

28 18%

US$148 32 %

30%

%

23 %

20 %

19 % 14 %

BASIC

38 %

37 %

35 %

%

18 %

14%

CLIENT

10%

MEDIUM

HIGH

Note: The analysis showed that the soft cost only constituted to a small percentage of the construction fitout cost. This was possible as the consultants were procured across multiple projects and CBRE was able to achieve cost savings or cheaper rates for the consultants. The high % builder works cost was due to the fact that the client had to factor in an additional cost for base building upgrades, including raised floors, false ceilings, ducting and lighting distribution which were not part of the handed over condition of the leased space.

India

US$40

US$56

US$69

18%

33 %

16%

14 % BASIC

40 %

37 % 31 %

30 %

14 %

US$75

44 %

39 %

38 %

12

CONSULTANT FEES

MEDIUM

15 %

13 %

6 CLIENT

12%

%

HIGH


REGIONAL PERSPECTIVE Sample of client benchmarking exercise Tokyo

1.55

Hyderabad

1.50

1.27

Bangalore

1.23

0.99

0.99

1.22

0.49

Hong Kong

1.01

0.56

1.12

0.60

0.92

0.83 0.76

HCMC

Seoul

1.15

0.99 Mumbai

2014 INDEX CLIENT

Sydney

1.11

Singapore

1.00 0.95

0.87

0.59 0.88

Taipei

0.69 0.98

1.07

1.00

1.00

Guangzhou

1.04

Manila

Beijing Jakarta

Shanghai

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DEFINING THE STANDARDS Sample of client benchmarking exercise

PROJECT STANDARD DESCRIPTION OF ITEMS

BASIC

MEDIUM

HIGH

N

N+1

2N

CLIENT

BASIC OFFICE FUNCTIONALITY

Elaborate Pantry and Breakout Areas Basic Pantry fit-out Very open office layout M&E Redundancy MEETING ROOMS

Integrated A/V and lighting control Basic A/V Projector & Audio/Telephone Tables and Chairs only SECURITY

Min. 3 levels of security 1 level of security No electronic security WALL & PARTITIONS

Plasterboard with fabric finish / to slab with high acoustic rating) Double glazed partition Single glazed partition Plasterboard walls FLOOR FINISHES

Marble/Stone Slab Finishes Carpet Tile Vinyl Sheets or basic concrete screed finishes

14

N+1


DEFINING THE STANDARDS Sample of client benchmarking exercise

PROJECT STANDARD DESCRIPTION OF ITEMS

BASIC

MEDIUM

HIGH

CLIENT

SYSTEM FURNITURE

Flexibility in Workspace Churn & Expansion Powerhoop as an Uninterrupted Footprint Division Resolved Design & Seamless Connectivity Simplicity with reduced kit-of-parts Unified look and combined usage Cable trough and various cable outlet application TASK CHAIRS

Asymmetrical lumbar support system Pelvic support 4-D arms and seat pan adjustments Upright back lock Supportive Mesh with tension zones Synchronized tilt mechanism Supportive Mesh with optional upholstery back

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LEASING & FIT-OUT

We continue to see clients in APAC across industry types take a conscientious approach to office occupancy needs with a greater degree of scrutiny applied in analyzing the costs, risks, and quality of the various components. Manish Kashyap Regional Managing Director, Asia Pacific Brokerage

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LEASING & FIT-OUT COST Annual Lease (US$/sqft)

• Slower leasing activity and the

large volume of new office supply scheduled for completion in 2015 pushed up overall vacancy in Asia for the first time in two years.

Hong Kong

228

Hyderabad

Beijing

• Improving business sentiment and

the positive job market is expected to grow moderately by 3.5%.

187

Philippines

Source: CBRE Asia Pacific Research Jun 2015

Bangalore

32 34

Tokyo

123

30

56

HCMC

Shanghai

114 109

59 63

Taipei

86

75

66 72

Singapore

Mumbai

Guangzhou

Sydney Jakarta

Seoul

Leasing & Fit-out cost (US$/sqft)

60

55

ng a

lo

es Ba

in pp

Ph ili

C

M

C

ei

30

re

89

85

34

d

32

yd e

56

89 ip

ka rta

ba i

59

82

66

um M

ho u

ey

ua ng z

66

H

86

Ta

63

109 103

G

ou l

135

75

Ja

72

Se

ha i

104

an g Sh

or e

ng ap

ky o To

jin g Be i

111

107

Si

H

on g

Ko ng

122 106

114

Sy dn

123 109

FIT-OUT COST

ra ba

LEASING COST

187

H

228

The illustration above is a representation of the upfront cash outflow needed per sqft in the first year of a corporation’s real estate for a decision to relocate or setup a new office. The leasing cost included is an annual rent rate per city for a Grade A Building in the Central Business District (CBD). Depending on the location, the leasing cost rate can actually be more expensive than the capital cost rate.

17


NEW WAYS OF WORKING There is a revolution happening in workplaces. No longer does ‘one size fit all’. As the key workplace efficiency metric shifts from sqft/desk to sqft/person some of the new workplace options are more affordable than people might think. Peter Andrew Regional Director, CBRE Worksplace Strategies, Asia Pacific

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CBREFIT-OUT TOKYO CBRE PROJECT MANAGEMENT | ASIA PACIFIC OCCUPIERS’ COST OFFICE GUIDE 2015

3X

4X

30%

30%

new meeting places

less leased space

investment in personal technology

saved in rent and CAPEX over 10 years

100% mobility within the office

room for

40%

more people

Source: CBRE, 2014.

We would not go back to the old way of working 19

CBRE PROJECT MANAGEMENT | ASIA PACIFIC OCCUPIERS’ FIT-OUT COST GUIDE 2015 CBRE TOKYO OFFICE

With the new breeds of workplaces there is an opportunity to get the end users of the environments more involved in the design process. What should be in the ‘kit-of-parts’ for our company? How do we place the critical types of activity spaces on the floor to align best with how we want to work? CBRE promotes a process that integrates the end users into the design process where key principles, ideas and options are debated, allowing proto-typing of design solutions. This approach promotes business buy in to new workplace solutions and workplaces that relate to how teams want to work.

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THREE NEW WORKPLACE OPTIONS New workplace solutions are widely discussed and debated in the media, but the prevalence of many terms and definitions over complicates what in reality is actually quite a simple choice of alternative solutions. CBRE has developed the ‘CBRE Workplace Compass’ as a framework that defines this diversity of solutions as one of four basic options. From the base option (Traditional Solution) there are solutions that increase efficiency (where the workplaces have less desks than headcount) and solutions that enhance work performance (by providing a diversity of settings that support a variety of different tasks.) When the fundamental measure of workplace efficiency changes from cost/sq ft to cost/person the nature of cost relativity between these options changes – new workplace solutions not only offer the ability to create vibrant and high performance workplaces, but when carefully conceived they can cost the same or less than traditional solutions. LEVERAGE

SHARING

1. TRADITIONAL SOLUTION

INCREASE

EFFICIENCY

2. HOT DESKING

3.COLLABORATIVE WORKPLACE

4. ACTIVITY BASED WORKPLACE

The collaborative workplace allocates a higher proportion of space to shared activity spaces (generally supporting collaboration) but everyone has allocated workstations.

In an Activity Based Workplace some or all people share a diversity of different work settings that support a variety of noisy/quiet/private, solo/ collaborative activities.

INCREASE

DIVERSITY

ENHANCE

PERFORMANCE

In a Hot Desking workplace some or all people share desks in a workplace that otherwise resembles the traditional solution.

All three new solutions rely on increased mobility of work within the work environment. These solutions need appropriate technology, work processes and mindsets in order to be most effective.

21


THE EXPANDED TOOLKIT New workplace solutions have a broader ‘kit-of-parts’ than a traditional workplace.

Workstations Instead of one single type of ergonomic work setting, new workplaces can have a diversity of work settings. In addition to a typical team desk (the neighbourhood where your team typically works together) there may also be choices of enclosed settings, undistracted settings, private settings and settings for ‘working together’. Some of the team settings may offer new functionality such as “sit/stand”.

Offices Offices still play an important role in new workplaces, in fact sometimes new workplaces might have more offices. When offices become a shared resource they need to be more multi-functional in their design – and for this reason they are defined here as ‘work/meet’ rooms.

Quiet/Private work settings

Work/Meet rooms

D A C B Small enclosed rooms A are an important component in the new workplace kit-of-parts.

Work/meet rooms are designed to serve a wide variety of functions.

Rooms about 1.6-1.8m wide are ideal as they can support a diversity of quiet/focused activities: solo concentrated work, two people working side by side, a variety of noisy activities: hands free conference calls; as well as confidential activities – including short face to face private discussions.

Rooms used ‘on demand’ as an office for an hour, half a day or a day. When used this way they support private work as well as meetings with colleagues.

Enclosed rooms can be supplemented by undistracted settings B – workstations surrounded by high screens located in quieter areas where people can work undistracted by colleagues.

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Office Function

C

Meeting or Work Room Function

D

Can be used for small groups ‘working together’ - using the screen, or the hands free phone or simply having a team meeting. Protocols for how these rooms are used and if they can be booked vary to suit specific needs.


THE EXPANDED TOOLKIT Furniture versus Joinery

With the emergence of a new diversity of work settings many organisations are increasing the amount of custom joinery. Meanwhile the furniture industry is developing new products to support these new functions. Given the experimental nature of some new work settings and the need to create workplaces that can adapt and change quickly over time, the balance of bespoke joinery and off the shelf furniture needs to be considered. Furthermore options to lease furniture for these alternative settings can help manage flexibility.

Collaborative work settings

Collaborative work settings are ergonomic settings where people can sit all day, that are designed to encourage and support a variety of ways of working together – in small groups or as project teams. Typically there are no workstation screens and ideally the area is partly separated/ enclosed by one or two walls that provide privacy for the team and surfaces for white boards and pin boards. If located amongst team neighbourhoods these collaborative settings also serve as overflow settings and touchdown settings for visitors.

Lockers and Belongings

In environments where individuals are no longer allocated a desk or an office the storage of personal belongings becomes very important – and at present not well supported as a comprehensive furniture solutions. As such, lockers and storage systems are often designed as joinery. It is critical to understand the work belongings and personal belongings that need to be stored (which can vary considerably country to country). When in doubt err on the larger rather than smaller size. It is also important to understand how people move belongings between a locker and work setting, and how belongings can be secured at a work setting.

23


OPTION 1 – TRADITIONAL OPEN MEETING COLLABORATIVE DESK TYPICAL DESK QUIET ROOM QUIET DESK OWNED ROOM

Cost per square foot

Area per setting

$104* (-)

118 sq ft/seat

Cost per person

Area per person

$12,235 (-)

118 sq ft/FTE

* This is for a medium standard fit-out in Shanghai

1. TRADITIONAL SOLUTION

Total Ergonomic Seats Total Headcount capacity Formal meeting seats/person Informal meeting seats/person

255 255 0.24 0.14

The traditional workplace is characterised by identical, efficiently laid out open plan work settings with a small number of enclosed offices around the building core. Open, informal meeting settings are located at each corner of the building and in the central pantry break out area. These settings also support short term touchdown work.

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OPTION 2 – HOT DESKING OPEN MEETING COLLABORATIVE DESK TYPICAL DESK QUIET ROOM QUIET DESK OWNED ROOM


Area per setting

$107* (-)

120 sq ft/seat

Cost per person

Area per person

$10,794 (-)

101 sq ft/FTE


2. HOT DESKING

Total Ergonomic Seats Total Headcount capacity Formal meeting seats/person Collaborative meeting seats/person

251 297 0.21 0.12

In a Hot Desking workplace some or all people share desks in a workplace that otherwise resembles the traditional solution. In this representation a number of offices have been replaced by locker storage areas. The overall number of work settings reduce but with an assumed sharing ratio (1 desk : 1.2 people) overall capacity is increased.

25


OPTION 3 – COLLABORATIVE OPEN MEETING COLLABORATIVE DESK TYPICAL DESK QUIET ROOM QUIET DESK OWNED ROOM


Area per setting

$101* (-)

131 sq ft/seat

Cost per person

$13,231 (-)

Area per person




229 229 0.27 0.33

The collaborative workplace allocates a higher proportion of space to shared activity spaces (generally supporting collaboration). In this representation all staff have an allocated work setting (open plan or office) but are expected to spend time at a wide variety of other settings interacting with colleagues (or seeking solitude).

26

131 sq ft/FTE


OPTION 4 – ACTIVITY BASED WORK (ABW) OPEN MEETING COLLABORATIVE DESK TYPICAL DESK QUIET ROOM QUIET DESK OWNED ROOM


Area per setting

$101* (-)

117 sq ft/seat

Cost per person

$9,825 (-)

Area per person


97 sq ft/FTE



257 308 0.20 0.25

In an Activity Based Workplace some or all people share a diversity of different ergonomic work settings that support a variety of noisy/quiet/private, solo/ collaborative work activities. Offices have been repurposed as multi-functional, shared work/meet rooms. Similar to the hot desking option, provision has been made around the core for lockers.

27


SPACE BUDGET MATRIX KEY METRICS

TRADITIONAL

HOT DESKING

COLLABORATIVE

ABW

Office Space (sqft)

30,000

30,000

30,000

30,000

Headcount (FTE)

255

297

229

308

Seat count

255

251

229

257

Dynamic (Headcount) Density (sqft/FTE)

118

101

131

97

Static (Seat) Density (sqft/seat)

118

120

131

117

Standard (Team) Workstation

232

232

176

176

Collaborative/Project Workstation

0

0

34

38

Quiet/Solo Workstation

0

0

0

20

Small work/phone room

0

0

6

12

Work/Meet Room (unassigned)

0

0

0

11

Offices (assigned)

23

19

19

0

Formal Meeting Rooms

7

7

7

7

Informal Meeting Places

11

11

17

21

Formal Meeting Chairs

62

62

62

62

Informal Meeting Chairs

36

36

76

77

Formal Meeting Chairs/FTE

0.24

0.21

0.27

0.20

Informal Meeting Chairs/FTE

0.14

0.12

0.33

0.25

Lockers

0

340

0

350

WORK SETTINGS

ON FLOOR COMMON SPACE

28


SNAPSHOT COMPARISON Headcount

CAPEX Per FTE

Meeting Chairs

2. HOT DESKING

+17 %

-11%

0%


-10%

+9 %

+41%


+21 % -19 %

% +41 %

OPTION 1 - TRADITIONAL

29


INTEGRATED CBRE SERVICE OFFERING Building selection through Operations overlaying Workplace Strategy Timeline

Workplace Strategy and Change Management

CBRE Occupancy Strategy Services

Other CBRE Services

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A feasibility study can take between two weeks and eight weeks depending on the depth of investigation and supporting research.

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CBRE Workplace Strategy Services A Workplace Strategy can take between four weeks and sixteen weeks depending on the size of the project and the depth of investigation. Most take between six and ten weeks. Workplace Change Management can commence as early as making a decision to proceed with a project and can continue until up to three to six months after relocation/ implementation of a new workplace strategy.

30


There is no single ‘ideal’ workplace solution. Every organisation needs to understand its unique appetite and capability to implement an alternative workplace solution. Understand though, that the new choices will not necessarily cost more … and in fact in some cases will reduce costs whilst creating better places to work.

31


REGIONAL COST ANALYSIS

32


33


AUSTRALIA COST ANALYSIS – SYDNEY SYDNEY The period saw strong demand from small space users as they took advantage of generous incentives to upgrade. Incentives fell marginally but a further decline is not expected. Vacancy will remain stable.

Ian Rea Managing Director Pacific Project Management +61 2 9333 9102 [email protected]

US$151 19%

US$109 19%

US$78 15%

37%

37%

37% 31%

34%

32%

34

16%

13%

10%

Basic

Medium

High

Furniture M&E Works Builder Works Soft Cost


JAPAN COST ANALYSIS – TOKYO TOKYO Net absorption improved in Q1 2015 and Grade A rents increased by 2.3% q-o-q. Lower oil prices and the weaker Yen will support corporate earnings and result in solid office demand. Rents will remain on an upward trend over the remainder of the year. In addition to demands for office buildings and logistic sites, the 2020 Tokyo Olympics and the need for more hotels for foreign visitors has pushed the construction cost further upwards.

Hisanao Kajiura Senior Director Tokyo Project Management +81 3 52889749 [email protected]

US$159 17%


US$107 19%

39%

US$73 16%

39%

37% 34%

36% 33%

13%

10%

7%

Basic

Medium

High

35


SOUTH KOREA COST ANALYSIS – SEOUL SEOUL Restructuring by domestic conglomerates continued to negatively impact office demand this quarter. Effective rents remained on a downward trend and are unlikely to recover without a strong catalyst for demand. Bruce Lee Senior Director South Korea Project Management +822 21705870 [email protected]

US$175 US$135 20%

US$96 15%

15% Basic

36

32%

23%

25% 45%

20%

40% 45% 12%

8%

Medium

High



CHINA COST ANALYSIS – BEIJING BEIJING Rents were stable for the Q2 of 2015. Technology and financial firms were most active in terms of occupier activities. New supply of 2.25Million sq.ft of GFA in H2 2015 is expected to further drive the leasing activities in the coming months.

Catherine Xiong Senior Director China Project Management +86 10 85880788 [email protected]

US$163 19%


US$106 US$72 20%

20%

41%

37%

34%

31% 29%

28% 17%

13%

10%

Basic

Medium

High

37


CHINA COST ANALYSIS – SHANGHAI SHANGHAI Leasing demand was led by domestic firms whilst multinationals focused on cost containment and opted to renew. Grade A rents increased by 1.4% q-o-q. CBD Grade A buildings are expected to record mild rental growth but decentralized submarkets will see some weakness as 60% of new supply set to be completed in the next six months is located outside CBD areas.

Bahtiyar Tay Senior Director China Project Management +86 21 24011403 bahtiyar.tay@ cbre.com.cn

US$158 20%

US$104 US$74 20%

20%

41%

38%

35%

29% 29%

28%

38

17%

14%

10%

Basic

Medium

High



CHINA COST ANALYSIS – GUANGZHOU GUANGZHOU Rent held firm. Steady leasing activity in newly completed projects pushed down vacancy by 1.3ppts. The outlook for rents is stable. The rental gap between new and existing buildings is narrowing. Catherine Xiong Senior Director China Project Management +86 10 85880788 [email protected]

US$152 30%


US$103 20% 38%

US$74 12%

37%

33% 33%

33%

34%

17%

12%

10%

Basic

Medium

High

39


TAIWAN COST ANALYSIS – TAIPEI TAIPEI Steady leasing activity coupled with the lack of new stock ensured Grade A rents increased marginally this quarter. Landlords will remain firm on rental negotiations as the availability of medium to large spaces is limited. James Ho Director Taiwan Project Management +886 2 77069538 [email protected]

US$117 19%

US$89 US$67 19%

19%

30%

29%

29%

43%

40

44%

44%

9%

8%

7%

Basic

Medium

High



HONG KONG COST ANALYSIS HONG KONG Grade A office demand picked up noticeably since Q2 2015 with vacancy rates across all submarkets trending down further. Space availability is reduced causing landlords to push rents higher. Large occupiers find it increasingly difficult to source and secure contiguous space, particularly in the Central CBD where financial sector firms and PRC companies have been active in locking into leasing opportunities.

Steve Palfrey Director Hong Kong Project Management +852 28202996 [email protected]

US$176 21%


US$122 19% 36%

US$82 15%

38%

38% 35% 34%

33%

13%

10%

8%

Basic

Medium

High

41


INDIA COST ANALYSIS – MUMBAI MUMBAI Demand was the strongest among all tier I cities as occupier activity improved, particularly from the e-commerce sector. The risk of oversupply remains high and rents are expected to continue on a downward trend in the short term. Gurjot Bhatia Senior Executive Director India Project Management +91 1142490200 [email protected]

US$84 15%

US$66 14% 44%

US$47 16%

44%

42% 31% 28%

42

29%

16%

13%

11%

Basic

Medium

High



INDIA COST ANALYSIS – NEW DELHI / BANGALORE / CHENNAI NEW DELHI Subdued demand in what is traditionally a quiet period, coupled with a surge in new supply, pushed up vacancy. New supply in Gurgaon and Noida will ensure occupiers have plenty of options for cost effective space. Gurjot Bhatia Senior Executive Director India Project Management +91 1142490200 [email protected]

US$77 14%


US$60 14% 44%

US$43 13%

43%

42% 30% 28%

29%

17%

14%

11%

Basic

Medium

High

43


INDIA COST ANALYSIS – HYDERABAD / PUNE / KOLKATA HYDERABAD Grade A rents rose by more than 5.0% across most submarkets amid sustained demand. Robust demand from the IT / ITeS sector will continue to support rental growth despite the increase in new supply. Gurjot Bhatia Senior Executive Director India Project Management +91 1142490200 [email protected]


US$70 13%

US$55 13%

US$40 12%

40%

40% 28% 20% Basic

44

41%

28% 28% 19%

18%

Medium

High


COST ANALYSIS – SINGAPORE SINGAPORE Rental growth remained solid at 1.8% q-o-q but rents have now peaked. Demand weakened noticeably this quarter. The increase in secondary space and the forthcoming wave of new supply scheduled to be completed in H2 2016 implies rents will remain flat for the rest of the year Garth Chapman Regional Director SEA Project Management +65 62291114 [email protected]

US$130 20%


US$111 20%

US$57

38%

40%

16% 40%

36% 33%

34% 10%

7%

6%

Basic

Medium

High

45


COST ANALYSIS – MANILA MANILA Strong demand for BPO space ensured further rental increases this quarter. Undersupplied pressure in Makati is expected to ease upon the completion of a few Grade A projects that are now available for lease.

Nicholas Price Director SEA Project Management +65 62291109 [email protected]

US$141 16%

US$89

39%

17%

US$49

39%

15% 40%

38% 36% 35% 13% Basic

46

8% Medium

6% High



COST ANALYSIS – INDONESIA JAKARTA Rental growth slowed further and vacancy trended up due to the lack of new demand and the addition of new supply. Weaker demand and abundant new supply will ensure tenants gradually gain the upper hand in negotiations.

Nicholas Price Director SEA Project Management +65 62291109 [email protected]

US$111 23%


US$82 22%

US$58 18%

36% 37%

38% 34% 32% 32% 12%

10%

8%

Basic

Medium

High

47


COST ANALYSIS – BANGKOK BANGKOK Vacancy temporarily increased this quarter following the completion of one new CBD Grade A office building. Grade A rents are expected to grow moderately on the back of steady leasing demand from domestic and overseas firms. Pattra Jotikabhukkana Associate Director Thailand Project Management +66 2 654 1111 ext 812 [email protected]

US$141 16%

US$89

39%

17%

US$49

39%

15% 38%

40% 36%

35% 13% Basic

48

8%

6%

Medium

High



COST ANALYSIS – VIETNAM HCMC Leasing demand improved but Grade A rents declined by 3.4% q-o-q as landlords reduced rents to attract tenants. Rents in existing stock will remain stable but new buildings will need to lower rents to secure tenants.

HANOI Nicholas Price

Strong demand from domestic occupiers pushed down vacancy to 20.2%. No Grade A stock will be completed this year but overall new supply is significant in the West and Midtown. Rents in those areas will continue to decline.

Director SEA Project Management +65 62291109 [email protected]

US$106 US$85 US$62

31%


28%

22%

35% 37%

38% 27% 30%

27%

10%

8%

7%

Basic

Medium

High

49


50


CBRE HONG KONG OFFICE

51

NOTES

CONTACTS CBRE CONTACTS Martin Woods Senior Managing Director, CBRE Project Management, Asia Pacific +852 2820 2869 [email protected] Zac Zdravev Senior Director CBRE Project Management, Asia Pacific +65 6326 1661 [email protected] Nick Lee Director CBRE Project Management, Asia Pacific +852 2820 8178 [email protected] Peter Andrew Regional Director CBRE Workplace Strategies, Asia Pacific +65 6326 1677 [email protected]

ACKNOWLEDGEMENTS Royston Toh Operations Manager CBRE Project Management, Asia Pacific +65 6229 1165 [email protected] Brendan Bruce Managing Director Haworth, South East Asia Cyrus Lee Associate Director Aedas, Hong Kong

© 2015 CBRE Group, Inc. All Rights Reserved. CBRE has taken every care in the preparation of this report. The sources of information used are believed to be accurate and reliable, but no guarantee accuracy or completeness can be given. Neither CBRE, nor any CBRE company, nor any director, representative or employee of CBRE company, accepts liability for any direct or consequential loss arising from the use of this document or its content. The information and opinions contained in this report are subject to change without notice. No part or parts of this report may be stored in a retrieval system or reproduced or transmitted in any form or by any means electronic, mechanical, reprographics, recording or otherwise, now known or to be devised without prior consent from CBRE. Agency Licence No.: L3002163I

ASIA PACIFIC OCCUPIERS' FIT-OUT COST GUIDE

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