Survey of Hong Kong office operation costs provides rare details and a comparison with Whitestone estimates

​We recently came upon an interesting survey of office building operating costs published by the Hong Kong Institute of Surveyors.1 Reported costs varied substantially by building grade, but building size and age had little discernable effect. Total operating costs for comparable buildings ($6.77 per square foot) were within 10 percent of Whitestone estimates. Specific costs for energy and management varied more widely and merit further study.

Questionnaire data was compiled from a sample of 52 office buildings, classified in grades of A, B, or C, in terms of construction quality and amenities. Operating costs included those commonly found in commercial and government charts of accounts. The authors found little systematic difference in operating costs, except by building grade. Size had little discernable impact, even with some buildings larger than 100k square meters. There was no evident trend in costs by building age across sample ages from 2 to 35 years. However, average costs did vary substantially by grade, with B grade and C grades less than A grade by 27 percent and 55 percent, respectively. The average monthly costs for twenty A grade buildings were $55.61 per square meter in 2009 Hong Kong dollars. For comparison purposes, we converted these costs into annual 2012 U.S dollars per square foot.

 

​ ​ ​ ​Office Building Operating Costs, Hong Kong
​HKIS
Survey
​Whitestone
Model Building
​Electricity ​$2.60 ​$1.75
​Water & sewer  ​.05 ​.15
​Custodial & refuse ​.65 ​1.07
​Maintenance & repair ​1.88 ​2.09
​Security ​.38 ​.30
​Landscaping ​.05 ​.16
​Management ​.89 ​1.78
​Others ​.27
​Total ​$6.77 ​$7.26
 

 

HKIS costs for A grade buildings were inflated to mid 2012, annualized, and expressed as gross square foot costs in U.S dollars. Insurance and non-facility related staff costs (doorman, lobby attendants etc. are not included). Whitestone costs are based on a model two story office
building.

Source: Whitestone Research

Annual costs according to the adjusted HKIS data are $6.77 per square foot. These are within 10 percent of an alternative value based on a model office building, as estimated by Whitestone.2 This is not surprising, given that the definition of an A class building—high quality finishes central air conditioning, elevators, and professional management—is consistent with the definition of the model building.

There are substantial differences in some specific costs, particularly electricity and management. These could be the result of a variety of causes, including: different levels of service, labor productivity, commodity costs, exchange rates, or account definitions. Further study of the detailed costs could be used to adjust the survey tool and increase the precision of the Whitestone model, bringing the two estimates even closer. 

1 See K.K. Lo and William K.H. Wong, Benchmarking of management fees for office buildings in Hong Kong. The Hong
Kong Institute of Surveyors (March 2010). Posted at http://www.hkis.org.hk/ufiles/PFM-OfficeMgtFee.pdf .

2 Whitestone COSTLAB online facility cost tool; also see The Whitestone Facility Operations Cost Reference 2012-2013,
International Version (Santa Barbara: September 2012).​​​​