Tech sector expected to drive demand for office space in Asia-Pacific

The on-going expansion and innovation of the technology sector in the Asia-Pacific region (APAC), including India, is fueling new possibilities for occupants and homeowners. Tech companies are the main drivers of office rental demand in the region, accounting for 20% to 25% of the demand for rented office space over the next five years, real estate advisor Colliers said in a report on Tuesday. .

Beijing, Shanghai, Bengaluru, Shenzhen and Singapore have ranked among APAC’s top five technology hubs, providing infrastructure and talent to occupants, and are well positioned to provide future growth and investment opportunities for owners, according to the Colliers report entitled “Drivers of innovation growth: how Asia-Pacific technology hubs are reshaping regional real estate‘. Other cities such as Seoul and Hong Kong are developing strengths in specific tech areas such as fintech, while Hyderabad and Sydney are emerging as new tech hubs.

Upcoming submarkets include Yangpu in Shanghai, Whitefield and North Bengaluru in Bengaluru, Hitec City (suburban business district) in Hyderabad as well as Sydney’s CBD South, the report adds.

“Demand from technology users has been the mainstay of Indian commercial real estate. After peaking at 65-70% of annual rental volumes in the 1990s and 2000s, although the share has declined to around 45-50% over the past decade, technology users are expected to increase their share in the post-pandemic period, ”said Siddhart Goel, Senior Director and Research Officer (India). “Indian office real estate is expected to retain its competitive edge over its APAC peers, as over 45% of the submarkets in the more established and upcoming categories are from the cities of Bangalore, Chennai, Delhi NCR, Hyderabad and Pune. This is also corroborated by our research which shows that around 70% of tech occupants are multinationals, compared to an average of 30-40% in many other ICCA cities. “

Interestingly, over the past year, global tech companies have expressed their intention to embrace working from home and a hybrid workplace model in the future, causing overall uncertainty in leasing office volumes in the future. India and around the world. However, IT companies have significantly increased their workforce, leading to speculation that they may also need adequate office space to accommodate their employees.

With captive centers and the business process outsourcing (BPO) industry dominating the office landscape in India, the space per person has grown from over 150 square feet at the start to around 70 to 80 square feet today. .

“After covid-19, we would expect that number to increase and settle in the range of 100 to 120 square feet per person. Given the increased use of technology in the workplace and a more flexible approach to businesses, we would expect 20-25% of the workforce to be able to work from anywhere in the world. medium and long term, ”said Colliers.

While Bengaluru ranks higher than Hyderabad as a technology hub, the latter attracts talent and multinational companies to the city. Rents are also 15-20% cheaper than in Bangalore.

“Overall, we expect the South Indian markets to lead the pack in terms of office rental demand for the technology sector. The importance of technology companies as a source of leasing demand will only increase, ”said Arpit Mehrotra, General Manager of Office Services (South India).

In addition to the growth in rents and rents, a key factor in the growth of technology users is the availability of quality space at competitive rents. With plenty of space in newer or peripheral neighborhoods, Bengaluru, Hyderabad, Shenzhen, Delhi-NCR and Manila are the main markets in terms of real estate factors, according to the report.

The Delhi-NCR micro-markets, Noida Expressway and Golf Course Extension Road in Gurugram, are among the top ten emerging sub-markets in the APAC region for technology occupants.

“… We expect momentum in the Delhi-NCR market, and once the restrictions are fully lifted, the market will recover.” Colliers anticipates an increase in adoption of the SME segment, towards economic micro-markets in the NCR, ”said Bhupindra Singh, MD, regional tenant representation (India).

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