Cushman & Wakefield: Office fit-out cost in Vietnam second most affordable in Asia-Pacific

Persistent inflation, tight labor markets, and ongoing supply chain delays have increased average fit-out costs across the Asia-Pacific but Vietnam’s office fit-out costs remain affordable, according to Cushman & Wakefield’s 2023 Asia Pacific Office Fit Out Cost Guide released on April 4.

Dr. Dominic Brown, Head of International Research and co-author of the report, said that while fit-out costs were up across the region by an average of 18 per cent in local currency (7 per cent in US dollar terms), there were early signs of easing pressure.

“Although costs remain above historic levels, supply chain stress has eased slightly along with the cost of shipping, and declines from the commodities pricing peak in 2022 have reduced pressure on energy and fuel pricing,” he said. “Inflation, while still high, is believed in many economies to have either peaked or to be close to peaking.”

The report showed that North Asian markets remain the most expensive to fit out in a “Collaborative Hybrid” style, with only Canberra, Australia, also appearing among the top 5. Within the top 10, Hong Kong (China) was the only market outside of North Asia and Australia / New Zealand to feature.

Among 32 countries surveyed, Vietnam’s two major cities - Ho Chi Minh City and Hanoi - were the second-most affordable, just after India’s.

“In Vietnam, we are seeing longer lead times due to manufacturing and supply chain issues from China and other supply countries,” said Mr. Riaz Khan, Head of Project & Development Services in Southeast Asia at Cushman & Wakefield. He also noted that pricing remains competitive, but tables and chairs imported from China increased more than 21 per cent because of new taxes. Audio/video (AV) products, meanwhile, have had a lead time of more than ten weeks because of a global shortage of chips.

Regarding Vietnam’s office market, Ms. Trang Bui, Country Head of Cushman & Wakefield Vietnam, commented that, recently, the government has raised the standard of fire prevention and fighting in construction. “Meanwhile, office lease transactions in recent years have happened mainly in existing buildings, due to the scarcity of new office supply with new fire protection standards, which makes completion time even longer than before,” she said.

Similarly, Mr. Tom Gibson, Cushman & Wakefield’s Asia Pacific Head of Project & Development Services, said that despite higher costs and constraints on capital expenditure, the conversation with occupiers has remained focused on the changing working environment, like “How much space do I need, and what is it going to look like?” he said. “Finding the balance between working from home and having people in the office - and how the right design can facilitate that - is still the Number 1 conversation in most markets.”

Mr. Gibson also said that general economic volatility had slowed occupier decision-making as capital expenditure across all sectors has come under closer scrutiny. But he said the flight to quality being witnessed in leasing transactions was also being reflected in fit-out decisions. Occupiers are looking at how they can optimize their spend. They see real estate as an essential expense and so are looking to use their real estate to improve the employee experience. He said that in many cases, that meant taking on less space that was of higher quality.

“Occupiers are increasingly wanting to create destination offices for their employees,” he emphasized. “‘Destination’ means different things to different companies - it could be creating a hospitality feel, or more social spaces - but ultimately, it is about creating a ‘stickiness’ that makes people want to come to the office.”