Industrial construction costs exceed APAC average by 60%: JLL

Higher expenditure was attributed to land scarcity and complex site conditions.

Hong Kong's industrial and logistics construction costs are approaching or exceeding $2,500 per square metre, more than 60% above the Asia Pacific (APAC) average, according to a JLL report.

The property consultancy attributed the higher costs to land scarcity, complex site conditions, vertical construction requirements, and stringent regulatory frameworks.

It said the cost premiums in the city, along with Singapore, are affecting capital allocation decisions, with developers increasingly considering alternative regional locations or cross-border logistics networks.

Higher expenditure is also prompting occupiers and investors to reconsider location strategies for manufacturing, logistics, and data centre developments, JLL added.

Across APAC, construction tender prices are expected to rise by 3.8% to 4.7% in 2027, compared with 3.2% to 4.2% in North America and 2.2% to 3.5% in Europe.

JLL attributed the regional increases to Middle East supply disruptions, skilled labour shortages, and growing demand for specialised facilities such as data centres and advanced manufacturing plants.

"Energy price volatility, transportation disruption and base materials costs all feed directly into regional tender prices," said Shweta Choudhari, director of Work Dynamics Research, Asia Pacific, at JLL.

"Increasingly, contractors are now pricing in geopolitical uncertainty as a permanent risk premium rather than a temporary measure," Choudhari added.

Construction wages also increased by 8% to 35% across key APAC markets between 2020 and 2026, outpacing consumer inflation and construction material costs.

Matt Bennion, head of Project and Development Services, Asia Pacific, at JLL, said developers should reassess project feasibility throughout the development process rather than delay construction in anticipation of lower costs.

"Postponing projects in hopes of relief is no longer viable; organisations must transition to a more agile approach to risk management and engagement of supply chains to maintain project viability," Bennion added.