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News Release

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


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.