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Startups increase their influence as occupiers of office space in Asia Pacific

Demand from fast-growing tech firms is driving new office formats and growth in coworking spaces


SINGAPORE, 8 August 2017 – Startups have emerged as a new category of occupiers in cities like Mumbai and Bengaluru, with more tech firms adopting unconventional formats such as coworking and industrial spaces.

Mobile devices, ecommerce and the rise of fintech (financial technology) have driven rapid growth of the technology sector in Asia Pacific, which has supported occupier demand for both commercial office and business park space. With India and China rapidly adopting innovative mobile shopping, financial and payment platforms, the region is currently home to seven of the 22 global fintech unicorns – meaning startups valued at more than US$1 billion.

In China, there is increasing demand for coworking spaces from these fast-growing companies, with a new trend of coworking operators becoming anchor tenants in retail malls. The number of coworking spaces in China has grown rapidly: in 2016, there were more than 500 coworking sites in Shanghai and Beijing alone compared to just a few in 2015.

"While there is a greater utilisation of coworking space, tech startups are a future source of Grade A office leasing demand and this is an opportunity for real estate investors and developers to create space that will meet this need," says Dr Megan Walters, Head of Research, Asia Pacific at JLL.

"Technology companies continue seeking high quality office space to attract talent, and we've seen a significant number of tech occupiers upgrading their premises from serviced to proper offices, and from Grade B to Grade A space. Landlords are sitting up and taking notice of what this new category of occupier wants," she adds.

Continued tech sector growth, however, faces a number of challenges. Recent data from JLL reveals that rising labour and operational costs, skills gaps, lack of supportive government policies, as well as real estate and infrastructural development remain the key tests to the burgeoning industry.

"High and rising labour and operating costs were frequently cited by our leasing experts as obstacles to future growth of the tech sector," says Christopher Clausen, Associate Research Director, Asia Pacific at JLL. "High home prices and cost of living were also mentioned as key considerations in some markets, while a shortage of talent and skills gaps may hold back tech development in others."

Key factors in tech sector location

When searching for office space, tech firms look for reliable power supply, and room for future expansion within the same building. "The importance of a high-quality and stable power supply to tech companies cannot be overstated," says Mr Clausen. "Many tech firms continue to store large volumes of data onsite meaning they are housing a large number of server racks within their office."

"Tech firms also want large floor plates that allow them flexibility in layout," adds Mr Clausen. "In addition, these companies are putting a priority on quality of life for their employees, so transport connectivity is another important factor."

 

For more information, download our "Tech firm office location choice—where do they cluster and what building features do they want?" report here.

 

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com

JLL has over 50 years of experience in Asia Pacific, with 36,800 employees operating in 95 offices in 16 countries across the region. The firm won the 'World's Best' and 'Best in Asia Pacific' International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.  www.ap.jll.com