What our index tells us globally
Insights into the Shell IT cost factor
As brought out in the introductory sections of this report, the highlight in this version of the report is the inclusion of IT & AV as part of total project cost indices.
The complete ranking of all locations with the ratio of IT & AV costs are provided in the chart below.
It is interesting to note the significant variance between locations when comparing these IT & AV costs against the total project costs, and this suggests that that is no general “rule-of-thumb” principle when estimating IT & AV costs.
These variants are largely due to the differing cost base in construction vs IT & AV costs, and while the construction costs are delivered within the market and mostly funded in local currency, IT & AV costs are based on the US dollar, with procurement done through global framework contracts supported by management resourcing through the nearest REOCIT hub. Against the backdrop of exchange rate volatility and the weakening of most key geographies’ currency value against the US dollar, it is likely that the ratio of IT & AV costs compared to construction costs is set to increase and these considerations should be weaved into the based assumptions during the investment decision phase.
Access the “the effect of exchange rates” section of this document.
Diving deeper into the analysis of the project cost data even suggests a negative correlation between construction and IT & AV costs; albeit the more attractive a location is to construct, the higher the IT & AV cost component in relation to the complete project costs.
This is shown in the scatter diagram below.
Delving into the key drivers behind the IT & AV costs, the treemap below provides further insights through the global average, indicating that AV hardware, resource and travel, and network hardware occupy more 80 percent of the total costs.
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Narrowing in on how IT & AV costs compare regionally, the figure below shows that costs per sqm are the most expensive in the Americas, followed by EMEA and Asia Oceania + Qatar. These variants are mainly driven by the cost differences in resources and travel, AV hardware and network hardware.
The complete ranking of all IT & AV costs by location is provided in the chart below.
In the analysis of IT & AV costs differentiators between locations, and some key considerations that surfaced were the variants between REOCIT resourcing rates dependent on the responsible hub locations, AV service provider’s country rates, IT equipment purchase costs depending on country, shipping costs and proximity to central distribution points, customs clearance and duties, or regulatory or compliance requirements that impact costs.
Based on these findings in this report, it is strongly recommended that real estate professionals begin the collaboration with their REOCIT counterparts as early as possible, prior to project initiation to get a more robust understanding of IT & AV costs and how these influence the total investment costs.
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