JLL: Office Sector Regaining its Central Role in Commercial Real Estate–At a Cost
(Illustration: JLL)
The office sector has regained a central role in commercial real estate as corporations adjust their hybrid policies to favor in-office attendance, according to JLL, Chicago.
While companies are optimistic about growth–planning increases to headcount and seeking more or improved office space–economic and geopolitical uncertainties persist, JLL said in its new Global Office Fit-Out Costs Guide 2025. The report analyzed data from 68 cities in 40 countries to uncover trends about cost drivers, sustainable fit out demand and market sentiment.
“Five years following the start of the global pandemic, we continue to see the evolution and growing momentum toward the office sector,” said Cynthia Kantor, CEO of Project & Development Services with JLL.
Office Fit Out Costs on the Rise, Led by North America
Across all regions surveyed, office fit out costs have increased in the last 12 months to varying degrees, JLL reported. As with previous years, JLL found fit out costs are highest in U.S., Canada, U.K., Switzerland, Saudi Arabia and UAE, Singapore and Japan.
Regionally, a significant premium for office fit outs is commanded by North America, where the average fit out costs is $3,070 per square meter, compared to the global average of $1,830 per square meter. In Latin America the average fit out cost is $1,790, followed by Europe, the Middle East and Africa, which present a wide range of office fit-out costs, with an average of $1,970. Asia Pacific offers the lowest regional average fit out cost at $1,460.
Global variations between major cities also persist. U.S. cities dominate the top 20 cities by office fit out cost globally, alongside other major cities such as Vancouver, Tokyo, London and Dubai.
Macroeconomic Impacts and ‘Flight to Quality’ Drive Market Cost Expectations
Of the markets JLL examined, fit out cost increases over the last 12 months were driven by inflation, material costs and currency volatility. Three-quarters of markets reported increases in raw material prices, and half have experienced labor shortages in the last 12 months that have increased construction costs.
“Organizations need to factor in these potential cost factors throughout global construction when developing their fit-out budgets,” the report said. JLL identified a nine-point pricing matrix, adapting standardized layouts to various quality levels (baseline, medium, high) and office configurations (progressive hybrid, moderate hybrid and traditional focus), reflecting a variety of cost factors and potential associated outcomes that can inform the design and delivery of office fit outs.
Sustainability Drives Continued Demand
Amid growing interest in healthier, energy-efficient workspaces, paired with the friction created by a lack of immediate supply, demand for sustainable fit outs is rising, with 60% of markets surveyed reporting an increase in client inquiries for a more sustainable fit out in the last 12 months, the report said. This echoes other recent JLL research that found two-thirds of organizations globally plan to increase investment in sustainability performance in the next five years.
“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 in the decision-making process, reducing the risk of for late additions or changes to meet sustainability needs,” JLL said.
