Tech turf: Five factors affecting location choice in Asia Pacific

The tech sector is taking off in Asia Pacific with both start-ups and tech giants are building their presence in the region.

March 16, 2017

Wether Facebook and Google in Singapore or Slack and Zen Desk in Melbourne

Meanwhile, Silicon Valley-like projects have popped up across Asia in cities such as Shenzhen, Bengaluru and Ho Chi Minh.

It’s made choosing where to base a regional office an increasingly complex task. And different types of tech companies – whether it’s to do with the sub-sector they work in or the stage of their development – will have different needs, says Christopher Clausen, Senior Research Manager, JLL Asia Pacific.

“For hardware designers, equipment can be reverse engineered and copied so choosing a location with strong intellectual property rights and protections is critical,” he explains. “Cost is a big consideration especially in the early stages for many e-commerce and social media companies while fin-tech firms, who often start off with large capital investment and have smaller teams, are hugely reliant on recruiting highly skilled employees with very specific skillsets.”

So what are the top factors influencing location choice in the Asia Pacific region?

1. Access to talent pools

Facilities management, Property management, Workplace strategy, Occupancy planning, Corporate solutions, Benchmarking, Engineering & operations

Tech firms recognise that hiring and retaining the best minds in the business is key to their success. The location of the office where they will spend much of their working life is, therefore, critical. Grade A buildings are one way e-commerce, fintech and social media firms are creating attractive workplaces to draw in the highly skilled workers they need. In cities, including Tokyo, Manila, Sydney, New Delhi and Mumbai, tech firms occupy more than 20 percent of Grade A Space.

2. Supportive government policy

Subsidies such as tax breaks and government support play a significant role, especially for those in the fintech or insurtech sectors where a government boost could accelerate developments locally. Others tech firms such as hardware designers would also find government support helpful in R&D stages.

For example, in areas such as the technology hub Zhongguancun in Beijing, tax holidays were introduced. Qualifying technology companies start out a lower tax rate and typically follow a graduated tax schedule.

3. Cost of rent

Tech firms are historically known to be relatively cost-sensitive occupiers – and often employ large number of employees. For this reason, many seek out lower rent space in more affordable areas – particularly rapidly growing technology start-ups that need room for expansion. Those specialising in e-commerce and social media are particularly sensitive to rent as profit margins are thin and time is needed to build up a user-base.

4. Access to customers

The market size of customers matters. This is the reason for many tech firms choosing to locate themselves in markets with large populations such as China and India. For example, Xiaomi revenues topped US$1 billion, less than two years after first entering India. In particular, locations with a larger market size are important to tech firms in the sharing economy.

5. Good connections

Good connectivity is essential for most tech firms relying on smart phone and internet penetration to power their businesses. A city’s physical infrastructure is also key to help create tech hubs with good proximity to amenities such as hotels, food and beverage outlets and transport links, and attract top talent.