PROPERTY fit-out costs in the country increased this year despite the stronger Philippine currency, a report by commercial real estate services company JLL (Jones Lang LaSalle) showed.
The JLL Asia Pacific Fit-Out cost guide 2020/2021 released on Wednesday said that average fit-out cost in the Asia Pacific increased 4.7% year on year, with the Philippines not an exception.
“The Philippines relies heavily on imported materials, which were costlier due to the effects of the pandemic and reported higher fit-out costs despite the effects of a stronger currency,” JLL said.
Fit-out costs refer to the furnishing or preparation of the interiors of a space for occupation.
The cost of furniture in the Philippine market is $375 per square meter, higher than South Korea ($364), Taiwan ($360), and New Zealand ($358). The cost is however lower than furniture in countries like Thailand ($377) and India ($392).
Working with furniture manufacturer Haworth, Inc., JLL said that furniture costs vary per region because of corporate agreements with suppliers, the use of imported furniture, and strategies for workplace design such as collaborative spaces versus traditional workstations.
“The nature of the business activity, including whether a market serves as a satellite or offshore location or as regional headquarters,” JLL said, also influences variations in furniture costs.
Reinstatement costs also vary per market. In the Philippines, the capital cost of rebuilding a space to a typical leased condition would be $118 per square meter.
This is much lower than Japan or Hong Kong, where reinstatement would cost $732 and $452 per square meter, respectively. It is also lower than the costs for Southeast Asian neighbors Singapore ($172) Indonesia ($161), and Malaysia ($140).
But it remains higher than costs in Thailand ($97) and Vietnam ($75).
JLL expects fit-out costs in most markets to continue increasing over the next year, especially with health and safety measures reducing onsite work. Companies may also use more expensive local sources of material to reduce project risks against supply chain disruptions.
But weaker office space demand could also contribute to price decreases.
“Many locations are reporting an increased willingness for contractors to revisit and reduce their overall margins as they compete for work in the short to medium term,” JLL said.
“This often serves to balance out cost increases in other aspects, examples including increases in health and safety costs in Manila (estimated at 1% of capital expenditures).” — Jenina P. Ibañez