Labour shortages and ESG pressures set to push Asia-Pacific office fit-out costs up 2–5%

Office fit-out costs across Asia-Pacific are poised for modest increases over the next year, with Knight Frank’s Asia-Pacific Fit-Out Cost Guide 2026 projecting rises of two to five per cent in most markets.

According to the report, the drivers of cost pressure are shifting. Broad inflation has eased in much of the region, but structural challenges, tight construction labour markets, rising competition for skilled trades, and stricter sustainability and compliance requirements, are increasingly dictating pricing trends.

Public infrastructure projects in countries such as India, Australia, and parts of Southeast Asia are further intensifying demand for skilled labour, creating selective cost spikes. Meanwhile, material prices remain uneven: oversupply in parts of China is providing short-term relief for some commodities, yet higher energy and transport costs continue to constrain meaningful savings.

The guide benchmarks fit-out costs across 23 cities in Australasia, East Asia, Southeast Asia, and India, using three specification levels, basic, mid/standard, and high/premium. 

Singapore ranks as the region’s most expensive market at US$2,029 per square metre (psm), edging out Tokyo at US$1,994 psm and Taipei at US$1,593 psm. At the opposite end, Phnom Penh remains the most affordable at US$375 psm, illustrating the wide variation in workplace investment conditions.

Tim Armstrong, global head of occupier strategy and solutions at Knight Frank, said: “Occupiers are managing fit-out cost pressures from multiple directions: labour, sustainability requirements, and the added uncertainty of trade tariffs affecting materials and supply chains. Our advice is to engage early, lock in scope, and build flexibility into procurement strategies to better manage cost and delivery risks.”

Singapore’s top ranking reflects high labour costs, limited contractor capacity, and stringent sustainability standards. Premium office fit-outs command a significant markup, underlining the city-state’s role as a leading financial and business hub prioritising workplace quality and employee experience.

In contrast, Bengaluru, Mumbai, and Delhi remain cost-competitive, while transitional markets such as Kuala Lumpur, Jakarta, Manila, and Bangkok are seeing mid-range and premium fit-out costs gradually rise due to higher workplace expectations and regulatory standards.

The report also flags currency volatility and import duties, from zero to more than 30% across the region, as potential risks for projects reliant on imported materials. At the same time, demand for hybrid-ready workplaces, ESG-aligned fit-outs, and adaptive reuse solutions continues to support investment, even amid a strong focus on cost discipline.

Christine Li, head of research for Asia-Pacific at Knight Frank, noted, “Labour constraints and ESG requirements are raising the floor for what a competitive fit-out costs, even in historically affordable markets. Global trade dynamics and tariffs introduce additional uncertainty, making early engagement and clear scope definition crucial for managing risk.”

Francesco Demarco, head of global portfolio solutions for Asia-Pacific, added, “The challenge is no longer simply controlling fit-out costs; it is understanding why those costs are moving and what that means for long-term portfolio strategy. Labour shortages, sustainability compliance, and trade-related material pressures are structural issues that will not be resolved quickly.”

As companies navigate these structural pressures, the report underscores that planning, flexibility, and strategic investment in ESG-compliant, hybrid-ready workplaces are increasingly essential to managing costs and sustaining long-term workplace value across the region.