New types of office users are emerging in the form of startups, with more tech companies exploring unconventional spaces such as coworking facilities and industrial properties, according to JLL, a real estate and investment management firm.

The technology sector in the Asia Pacific region has experienced significant growth, driven by mobile technology, e-commerce, and the rise of fintech. This growth has fueled demand for both traditional office spaces and business parks. Notably, India and China are at the forefront of adopting innovative mobile shopping, financial, and payment platforms, evidenced by the fact that the Asia Pacific region is home to seven out of the 22 global fintech unicorns, which are startups valued at over US$1 billion.

In China, there is a growing demand for coworking spaces from these rapidly expanding companies, with a new trend emerging where coworking operators are becoming anchor tenants in retail malls. The number of coworking spaces in China has surged: in 2016, there were over 500 coworking sites in Shanghai and Beijing alone, a significant increase from the limited number in 2015.

“While coworking spaces are seeing increased utilization, tech startups represent a future source of demand for Grade A office leases. This presents an opportunity for real estate investors and developers to create spaces that cater to this specific need,” says Dr. Megan Walters, Head of Research, Asia Pacific at JLL.

“Technology companies are continuously seeking premium office spaces to attract top talent. We have observed a significant number of tech occupiers upgrading their premises from serviced offices to dedicated office spaces, and transitioning from Grade B to Grade A spaces. Landlords are recognizing and responding to the requirements of this emerging category of occupiers,” she adds.

Source: JLL website. Tech is hot in the Asia Pacific region, affecting demand for real estate.

However, the continued growth of the technology sector faces some obstacles. Recent data from JLL indicates that increasing labor and operational costs, skill shortages, a lack of supportive government policies, and real estate and infrastructure development challenges remain significant hurdles for this burgeoning industry.

“Our leasing experts frequently mention high and rising labor and operating costs as barriers to the future growth of the tech sector,” says Christopher Clausen, Associate Research Director, Asia Pacific at JLL. “High home prices and the overall cost of living were also highlighted as significant considerations in some markets, while talent shortages and skill gaps could hinder tech development in others.”

When selecting office spaces, tech firms prioritize a reliable power supply and the potential for future expansion within the same building. “The significance of a robust and stable power supply for tech companies cannot be emphasized enough,” states Clausen. “Numerous tech companies continue to store substantial amounts of data on-site, necessitating a large number of server racks within their offices.”

“Tech firms also seek spacious floor plans that offer flexibility in layout,” adds Clausen. “Furthermore, these companies prioritize the quality of life for their employees, making convenient transportation and connectivity crucial factors.”

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More details are in JLL’s Tech firm office location choice — where do they cluster and what building features do they want? report.

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