Tech Firms Predicted to Lease a Quarter of SE Asia Office Space by 2028

Tech firms will account for 15 to 25 percent of annual office leasing volumes in Southeast Asia in the coming ten years, said real estate brokerage JLL in a report published today. The real estate consultancy sees ecommerce and Internet providers playing a growing role in driving office occupancy in the region of 655 million people.

Over the past three years, tech companies occupied an average of five to 10 percent of the total grade A office space leased in the region, according to the report. However, JLL predicts that the proportion of tech companies among high-end office tenants will rise at six percent annually in the coming years.

Given its growing population and above world-average GDP growth, Southeast Asia has long been seen as the next big market for tech companies, with a study published last year by Google and Singapore’s Temasek Holdings predicting that the region’s Internet economy would reach $200 billion in value by 2025.

Robust Economies Drive Rapid Rental Growth

According to the e-Conomy Southeast Asia report based on the Google-Temasek study, the region’s overall economies are forecast to expand at 5 percent annually until 2020, well above the global rate of 3.5 percent expected over the same period.

“Last year, the tech sector attracted over US$6 billion in funding, and the industry’s growth will contribute significantly to future office leasing volume, which we estimate will rise at 6 percent annually amid a GDP growth rate of around 5 percent,” said Regina Lim, the head of capital markets research for Southeast Asia at JLL.

According to Cushman & Wakefield, in the first quarter of 2018, 10 out of 17 major cities in Southeast Asia recorded an upward trend in the office rental market. The region’s office tenants have absorbed around seven million square feet of new grade A space this year, ranking second in Asia after the Greater China region.

The city-state of Singapore saw the region’s highest office rental prices at an average $7.12 per square foot a month, while Vietnam’s commercial centre of Ho Chi Minh City followed at $4.90 per square foot. Bangkok ranked 14th among Asian cities with average rates said to be $2.87 per square foot per month, slightly above the $2.83 rate in Hanoi.

Cushman & Wakefield also pointed out that technology companies and co-working spaces operators played a growing role in office leasing during the first quarter of this year.

Tech Players Compete for SE Asia Market Share

Investments from e-commerce and other tech businesses have helped boost office leasing in the region, according to JLL. “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,” said Lim.

Last week, the global tech giant Facebook announced that it had selected Singapore as the site for its first billion-dollar data centre in Asia, choosing to build a 170,000-square-metre server farm in the city’s Jurong East area, close to Google’s two data centres in Jurong West.

Apart from the US tech giants, Chinese digital and technology firms such as Alibaba and Tencent are also expanding their e-commerce, data and cloud operations across the Southeast Asia region.

Alibaba has invested $2 billion in the past 15 months to boost its control of Singapore-based e-commerce player Lazada, and bought into Indonesian e-commerce group Tokopedia in August of last year. In February, Tencent was reported to be investing $1.5 billion in Indonesia’s start-up Go-Jek, which provides ride-hailing, logistics, and digital payments.

Tencent Holdings, another Chinese company specialized in gaming and social media, has invested in Singapore-based Sea, which operates the Shopee e-commerce site and the Garena gaming and esports platform.

Homegrown Tech Firms on the Rise in Southeast Asia

Alongside these investments by overseas technology companies, local Southeast Asian tech firms are also increasing their footprints in the region.

After taking over Uber’s Southeast Asia operations, in March 2017, local transport firm Grab doubled its research and development space in its Singapore headquarters by moving into an almost 100,000-square-foot space in Singapore’s central business district. At the same time, the company also announced that it would open two new regional R&D centres in Bangalore and Ho Chi Minh City.