Tech firms’ new take on offices in China

March 6, 2017 / By  

Over the past decade, China has shifted much of its resources to offer national and local policy-incentives that help accelerate development in the technology sector. The result has been a boom in technology businesses, particularly evident in Tier 1 cities like Beijing, Shanghai, and Shenzhen, where mobile apps, social media, and other technological advances have been woven into daily life.

JLL’s recently launched white paper “Tech firm office location choice — how does it work in Asia Pacific” analysed companies’ office location decisions from an Asia Pacific perspective. In China, three trends have guided the evolution of tech firms’ real estate strategies.

Rising demand for Grade A offices from technology firms

Commercial real estate has been a key beneficiary of China’s policy push to support the tech sector. Our analysis of Grade A net absorption in four Tier 1 cities and one representative Tier 1.5 city indicated that the tech sector’s demand for Grade A office space surpassed other sectors such as manufacturing in 2016. Tech firms are currently catching up with absorption levels in the finance and professional service sectors.

Large volumes of capital funding are enabling more and more tech companies to upgrade or expand to Grade A space as they seek to improve their corporate images and make themselves more attractive to talent. This trend is supported on the supply side as well, as all four Tier 1 cities have fast-growing emerging CBD markets that offer large amounts of new Grade A space, usually at rents that a range of tech companies can accommodate.

Figure: Grade A office demand source in all four tier 1 cities and Chengdu, a tier 1.5 city in 2016
Source: JLL
The above proportions refer to total net take-up in Beijing, Shanghai and Chengdu, and total leasing volume in Shenzhen and Guangzhou

Diversifying real estate strategies

Technology firms traditionally have focused on leasing office space and serving as tenants. Recently, however, we have observed some companies adopting more diverse real estate strategies. Many of these are domestic industry leaders who have accumulated considerable wealth in recent years, have high liquidity, and are seeking better ways to allocate their investments and assets. We have seen examples of technology companies engaged at multiple stages of the commercial property development cycle, including land acquisition, constructing buildings for self-use and leasing, and even buying and selling office assets for investment.

New workplace strategies

JLL Shanghai recently relocated to a new office that offers some of the most cutting-edge workplace design within China’s professional services sector. The office contains co-working features, spaces that promote employee’s health as well as high-tech amenities, including VR equipment, a robot receptionist and a wireless working environment.

Workplace design has also has started to draw the attention of tech companies, who are looking for more dynamic, forward-looking office spaces. Traditional workspaces are falling out of favour, and domestic industry leaders are looking to office design models from technology leaders like Google and Apple so their employees too can benefit from a more interactive and creative work environment.

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