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Tech firms driving demand for Asia office space

Property & Real Estate

Tech firms driving demand for Asia office space

Jones Lang LaSalle is projecting that technology

companies will drive office occupancy, potentially accounting for 15 to 25 percent of annual gross office leasing volumes in the next decade. This compares to figures of only five to 10 percent just three years ago.

Technology companies have become a key office occupier group in the region and they are frequently the earliest tenants to pre-commit to newly constructed buildings, according to a report published by JLL.

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Property & Real Estate

“Given that technology firms will become a key source of office occupancy, this is an opportunity for real estate investors and developers to create space that will meet this need,” explained Regina Lim, Head of Capital Market Southeast Asia Research at JLL.

“Last year the tech sector attracted over US$6 billion in funding and the industry’s growth will contribute significantly to future office leasing volume. We estimate that this will rise at six percent annually amid a GDP growth rate of around five percent.”

South east Asian economies are forecast to expand at five percent annually until 2020, exceeding the global rate of 3.5 percent. The region’s internet economy could be worth more than US$200 billion by 2025, with e-commerce seen as the fastest-growing segment. Along with an expanding middle class, this segment is predicted to rise at 30 percent in the next five to 10 years to reach US$88 billion by 2025, based on a Google-Temasek study.

As internet companies developed their presence rapidly in the region in the last decade, e-commerce firms in particular have flourished in the past two years. The biggest global technology companies, including Alibaba, Facebook, Google and Sea, currently each occupy a total of 20,000 to 50,000 sq. metres, spread across three to five cities. Many of these companies have increased their headcount by 30 to 50 percent annually over the last five to 10 years, states the JLL report.

Co-working and flexible workspace operators have also contributed to the region’s office demand. Flexible workspaces have climbed by an estimated 40 percent annually in the last three years and now take up two percent of office stock in the region, compared with 0.5 to one percent in 2015.

“We think in the next decade, e-commerce companies will continue to grow, together with flexible workspace and co-working operators,” added Miss Lim. “As e-commerce firms spread their footprint, we predict that gaming and e-sports platforms may become the next driver of office occupancy in south east Asia.”

According to JLL, the acceleration in office take-up by technology firms in the last three years has occurred mainly in Jakarta, Bangkok, Manila and Ho Chi Minh City, with the sustained growth of these companies driven by strong socio-economic trends.

Technology firms in Singapore, Jakarta and Manila have tended to set up their operations in prime CBD areas. In Malaysia’s Kuala Lumpur, technology companies’ office

Regina Lim, Head of Capital Market Southeast Asia Research at JLL

demand has recently shifted towards the fringe areas due to the introduction of mass transit infrastructure. Similarly, in Bangkok, technology companies have chosen to operate out of traditional office locations along mass transit lines.

“Regionally, location preferences are influenced by access to talent pools, supportive government policies and access to customers. These provide for an innovative ecosystem conducive to collaboration and entrepreneurship,” added Miss Lim.

Within each city, JLL has observed that technology companies emphasise the need for transport connectivity, integrated developments incorporating live, work and play elements and building prominence and signage.

“Technology companies have continued to seek highquality office space to attract talent, and landlords in each Southeast Asian city will have to take notice of what this expanding category of occupier wants,” concluded Regina Lim.

For more information, download the report here: Technology firms transform Southeast Asia

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