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JLL: Tech firms increasingly needing office space

Released at: 15:29, 11/09/2018

JLL: Tech firms increasingly needing office space

Photo: Khanh Chi (VET)

Vietnam holds potential in flexible office space development as tech giants may occupy up to a quarter of all office space in region by 2030.

by Hong Nhung

As growth in Southeast Asia’s online economy gains pace, tech companies will drive office occupancy and potentially account for 15 to 25 per cent of annual gross office leasing volumes in the next decade, compared to about 5 to 10 per cent three years ago, according to JLL.

“Ho Chi Minh City is now ranked fourth in Southeast Asia in terms of flexible office space volume,” said Mr. Stephen Wyatt, Country Head of JLL Vietnam. “The city has seen a number of tech giants coming over the past 12 months, given the government’s startup policies, the huge population, and improved education.”

“There is no better place to witness the growing demand from tech firms and co-working operators than Vietnam. The country is catching up quickly with its regional peers, due to a young, dynamic, tech-savvy, entrepreneurial population. We have seen a dramatic increase in demand from tech firms and co-working / flexible working operators over the past three years and anticipate this will be one of the key trends over the next five years.”

Tech companies have also become a key office occupier group in the region and are frequently the earliest tenants to pre-commit to newly-constructed buildings, according to JLL’s report “Technology Firms Transform Southeast Asia”.

“Given that tech firms will become a key source of office occupancy, this is an opportunity for real estate investors and developers to create space that will meet this need,” said Ms. Regina Lim, Head of Capital Markets Southeast Asia Research at JLL. “The tech sector attracted over $6 billion in funding last year and the industry’s growth will contribute significantly to future office leasing volume, which we estimate will rise 6 per cent annually amid a GDP growth rate of around 5 per cent.”

Southeast Asian economies are forecast to expand at 5 per cent annually to 2020, exceeding the global rate of 3.5 per cent. The region’s internet economy could be worth more than $200 billion by 2025, with e-commerce seen as the fastest-growing segment. Along with an expanding middle class, this segment is predicted to rise at 30 per cent in the next five to ten years to reach $88 billion by 2025, based on a Google-Temasek study.

Office demand accelerating in developing countries

Separately, co-working and flexible workspace operators have also contributed to the region’s office demand. Flexible workspaces have climbed by an estimated 40 per cent annually in the last three years and now take up 2 per cent of office stock in the region, compared with 0.5 to 1 per cent in 2015.

“We think in the next decade, e-commerce companies will continue to grow, together with flexible workspace and co-working operators,” said Ms. Lim. “As e-commerce firms spread their footprint, we predict that gaming and e-sports platforms may become the next driver of office occupancy in Southeast Asia.”

According to JLL, the acceleration in office take-up by tech firms in the last three years has occurred mainly in Jakarta, Bangkok, Manila, and Ho Chi Minh City.

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