Australia leads Asia Pacific in office fit-out investment plans

JLL reveals that Australian organisations are set to significantly increase their investments in office space design and fit-outs, with costs in Australia higher than the regional average. According to the JLL Global Office Fit-Out Costs Guide 2025, 72% of Australian organisations plan to boost their investment in office space design and fit-outs over the next five years, well above the global average of 59%.

The average fit-out cost in Australia is AU $3,220/sqm, which is higher than the Asia Pacific average of AU $2,453/sqm. Perth stands out as the most expensive Australian city for fit outs, while cities like Sydney and Melbourne are closely following.

Alan McKay, JLL's Managing Director, Project and Development Services, Australia and New Zealand, said, "The Australian market is showing a strong appetite for office upgrades enchasing the quality of space and technology. We're seeing a 14.59% year-on-year change in average fit-out costs, reflecting the increasing demand and complexity of modern office spaces."

The report highlights a "flight to quality" trend, where organisations are prioritising high-quality spaces with enhanced technology and wellness features. This aligns with the finding that 63% of employers in Australia plan to increase investment in existing building refurbishment over the next five years, significantly higher than the APAC average of 54%.

While inflation has stabilised, worker shortages and wage growth in competitive markets have driven up labour costs in the construction sector. The report predicts that access to skilled and semi-skilled labour will remain critical across markets as competition for talent intensifies, potentially driving wage inflation and impacting project costs and timelines.

Australian businesses are also investing more heavily in AV and technology for office fitouts, reflecting the growing emphasis on supporting hybrid work models. "The increased investment in technology is a direct response to the evolving nature of work. Australian companies are keen to create environments that seamlessly support both in-office and remote work, driving up spending on advanced AV and IT infrastructure," Mr McKay added.

Sustainability is becoming a key factor in fit outs, driven by environmental regulations, local government initiatives, and employee demand for eco-friendly workspaces. "Sustainability is no longer just a buzzword in Australian office fitouts," Mr McKay explained. "We're seeing a genuine commitment from organisations to create environmentally friendly workspaces, which not only aligns with corporate values but also offers substantial long-term cost benefits."

Martin Hinge, Executive Managing Director, Projects & Development Services, Asia Pacific at JLL, noted the trend towards high-quality, technology-integrated workspaces in Australia. He stated, "Australian organisations are recognising the need for high-quality, technology-integrated workspaces to support evolving work practices. This investment trend aligns with the increasing demand for sustainable and adaptable office layouts we're seeing across the country."

With a growing supply gap for Grade A offices, there's an increased focus on lease renewals and upgrading existing tenancies, anticipating more retrofit projects as supply tightens. The report also discusses the potential impact of U.S. tariffs on the APAC real estate and construction industry, which may affect costs and decision-making processes.

Mr McKay concluded, "As we move into 2025, we expect to see a surge in office renovations and upgrades across Australia. Organisations are recognising that well-designed, modern offices are crucial for attracting and retaining talent in a competitive market. Early planning and strategic investments will be key to navigating the challenges of tight supply and rising costs."

COMMO