Tech firms will account for nearly 30% of Tier I cities’ office net take-up by 2020
JLL publishes the latest whitepaper “Office Space X Tech Firms”
Shanghai, December 10, 2019—With the great support from strategic policy level, China’s tech firms have gone through a vigorous development over the past years. This trend represents an increasingly important driver for the office demand in the market. JLL (NYSE: JLL) predicts that tech industry’s share of Grade A office net take-up in Tier 1 cites will reach 27%, for the first time, by the end of 2020.
In the latest research by JLL, Office Space X Tech Firms, lays out a roadmap for the market to comprehend and forecast technology companies’ unique office demand. JLL identifies how tech firms’ office needs evolve as they go through three main stages of business evolution, including start-up, scale-up, and mature. A data-driven corporate real estate (CRE) portfolio selection model is also introduced in the report, which aims to assist tech firms in their CRE decisions.
Anny Zhang, Head of Markets for JLL in China noted, “In tech hubs such as Beijing, Shanghai, Shenzhen, Hangzhou, and Guangzhou, tech firms have risen to become a major force in office demand. We believe the impact will deepen as the sector works on completing its industry ecosystems. We also see more traditional companies setting up their technology functions in these cities. A few Tier II cities will benefit from this trend as tech firms expand their national footprint strategically.”
Based on tech firms’ unique office demand, JLL’s CRE portfolio selection model helps tech firms make office location decisions based on two sets of factors - market-driven and cost-driven. When selecting headquarter locations or setting up new businesses, the market drivers are weighted more to reflect the need for top talent, market size, and accessibility to capital. While cost drivers are prioritized when tech firms look to consolidate or place back-office functions, often including talent pool, market support, and real estate cost.
Cathy Huang, Head of Research for JLL in East China, points out: "We believe a data-driven corporate real estate model will greatly help tech firms to tackle CRE decision-making challenges amidst the fast-changing business scope and size in the China market. With a market-driven versus cost-driven approach, our CRE portfolio selection model can be applied at the city-level as well as at the submarket-level by using different criteria."
JLL surveyed over 110 tech firms in a range of sectors, from deep-tech sectors such as chip development and 5G firms to internet platforms and gaming firms, with a scale spanning from start-up to established, to explore the characteristics of their office demands at different stages of growth.
- Start-up companies prioritize ‘flexibility’ as the number one criteria and often favor fully furnished workplaces with short-term leases.
- Scale-up companies focus on expanding with speed and quality. Office building image & quality and privacy become more important for this group.
- Tech firms at the mature stage often have stronger appetite for office consolation and their need to set up R&D centers also increases, and many of them will start to look into purchase options for self-use.
The tendency of tech firms to consistently self-disrupt, often with a sense of urgency, speaks for their unique office space demand at three main stages of their growth trajectory. A data-driven methodology and future-proof approach will enable tech firms to better make their real estate decisions which matches with business strategies.
Daniel Yao, Head of Research for JLL in China points out: "We have also noticed that tech firms often require a combination of different space requirement to address the influence of market-driven and cost-driven factors while they are expanding their footprint. This brings to a new opportunity for landlords, as a cross-city and cross-submarket office portfolio will become increasingly valuable in offering an integrated real estate solution for the growing tech industry.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of nearly 92,000 as of June 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com