Wuhan – China’s new tech magnet

March 15, 2019 / By  

In recent quarters, an increasing number of large domestic tech firms from Tier 1 cities are seeking to locate their headquarters, expand new branches, and even set up R&D centres in Wuhan. Wuhan, with a population of 10.9 million, lies at the intersection of Yangtze River and Han River. The city is known to be the economic, industrial, education and transportation hub of central China.

Wuhan’s economy is undergoing rapid transformation as it upgrades its industry and fosters new growth drivers. Among these, technology stands out. The tech sector has blossomed into a major force in Wuhan’s office market space.

A dramatic increase of tech firm leasing in the office market

Wuhan has become one of the country’s leading technology hubs. In 2017, its total output value of new and high-tech industry reached USD 142 billion, double the amount recorded in 2012. The office market has witnessed an increase in the uptake of space by tech companies.

Tech tenants in Grade A buildings have increased from 11% in 2015 to 20% in 2018, outpacing the finance sector to be the largest office market tenant. One of the key reasons behind the strong demand is Optics Valley – Wuhan’s “national innovation demonstration zone” that has supportive polices in place to attract investments such as subsidies for firm registration and office leasing.

Figure 1: Percentage Change of Tech Tenants in Grade A Offices
Source : JLL Research

Tech unicorns drive tech firm growth

Unlike traditional manufacturers that often prefer utilitarian offices and affordable business parks, emerging tech firms are focused on boosting company image. In Wuhan, tech unicorns have become a leading driver for premium office space as they aim to attract young local talent.

For instance, national media company Bytedance has expanded their Grade A and Grade B office footprint in recent years. Douyu, Wuhan’s biggest local webcast firm, has leased four floors in a Grade A project last year. Some national-level companies are more optimistic. Xiaomi for example, has purchased land to build its own office building to set up its regional headquarters.

Why choose Wuhan

As China continues to transform and upgrade its economy, we are expecting robust tech-sector demand in the years ahead. That said, exorbitant rental costs in Tier 1 cities will keep pushing tech firms to less-costly Tier 2 cities, like Wuhan.

Wuhan stands out among Tier 2 cities for its educational resources and local talent pool. As at 2017, there was 84 higher education institutions with 948,000 students enrolled; both figures surpassing those of Tier 2 cities such as Chengdu, Hangzhou and Xi’an. To retain talent and create employment opportunities, Wuhan’s government has launched various policies including relaxing residency requirements and encouraging investment in various industries.

Wuhan’s outstanding transport connectivity makes it an ideal second home for both companies and migrants. Wuhan is within a two-hour flight to most major Chinese cities that can also be reached via high-speed rail without extra transfers.

While economic uncertainty persists in 2019, we believe that tech firms will be the driving force in Wuhan’s office market.

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