The recent rise of the tech sector in Asia Pacific has been meteoric, with tech firms needing more office space to accommodate their rapid expansion.
Take for example how Singles’ Day, the biggest day in online shopping in China, saw Alibaba Group recording US$17.8 billion in gross merchandise volume in China. That’s $15.1 billion more than all sources combined on Cyber Monday in the United States.
Tech firms, such as Alibaba, form an increasingly important source of office and business park leasing demand, accounting for 17 percent of five million square metres of gross leasing activity from 4Q15 to 3Q16.
Our data reveals that tech companies that design hardware, such as Cisco and Juniper, were the most active category, followed by e-commerce companies including Amazon and Flipkart.
To get to the heart of what drives office location choice for companies, we surveyed JLL leasing experts and analysts in 17 Asia Pacific markets. Our forthcoming report, Tech firm office location choice—how does it work in Asia Pacific?, describes location choice drivers in detail. We summarise some of our key findings below.
Size matters, so does cost
Market size is key for tech firms in selecting a new office location. Across nearly all tech segments we analysed, the potential of business growth as a result of tapping into big markets has a substantial impact on location choice within the region.
Some companies have identified India as a key market in part because of its large consumer base of more than one billion people in total population. For example, Xiaomi revenues topped US$1 billion, less than two years after first entering India.
Other advantages such as cost, skill level and rule of law also play an important role in the location choices tech firms make across the region.
Attracting the right talent is critical
Agglomerative forces such as talent pooling and knowledge spill-overs have long been theorised to drive firms’ location decisions. We need not look far to find evidence.
For example, financial services companies cluster near stock exchanges. Perhaps the most celebrated industry cluster in recent history has been the rise of tech firms in Silicon Valley.
Some of the most well-known companies specialising in computer technology, consumer electronics, social media and even automobiles are headquartered there.
According to our survey, at the local level, i.e. within a city, access to talent pools was cited as the most important driver of location choice. Firms understand that attracting and retaining the right talent is critical to the success of their business.
Our analysis indicates that tech firms are an important source of occupier demand for investment grade office and business park space. Furthermore, given the accelerating pace of technology advancements, tech firms are set to play a key role in shaping not only our work and personal lives but also occupier demand.
How will oil prices shape the Covid-19 recovery in emerging markets?
– After falling significantly in 2020, oil prices have returned to pre-pandemic levels
– The rise has been driven by OPEC+ production cuts and an improving economic climate
– Higher prices are likely to support a rebound in oil-producing emerging markets
– Further virus outbreaks or increased production would pose challenges to price stability
A combination of continued production cuts and an increase in economic activity has prompted oil prices to return to pre-pandemic levels – a factor that will be crucial to the recovery of major oil-producing countries in the Middle East and Africa.
Brent crude prices rose above $60 a barrel in early February, the first time they had exceeded pre-Covid-19 values. They have since continued to rise, going above $66 a barrel on February 24.
The ongoing increase in oil prices, which have soared by 75% since November and around 26% since the beginning of the year, marks a dramatic change from last year.
Following the closure of many national borders and the implementation of travel-related restrictions to stop the spread of the virus, demand for oil slumped globally.
In the wake of the Saudi-Russia price war in early 2020, Brent crude prices fell from around $60 a barrel in February that year to two-decade lows of $20 a barrel in late April, as supply increased and demand plummeted. The value of WTI crude – the main benchmark for oil in the US – fell to record lows of around $40 a barrel last year on the back of a lack of storage space.
While global demand for oil remains low, one factor credited with reversing the trend is the decision to make significant cuts to oil production, which subsequently tightened global supplies.
How the Rural-Urban Divide Plays Out on Digital Platforms
It is one thing for entrepreneurs, whether urban or rural, to create and operate an online store, as some digital platforms have made it relatively easy to manage an e-store – even by using just a smartphone.
Will South-east Asia’s tech giants turn to SPACs to boost post-pandemic growth?
– The vehicle is widely used to help tech start-ups go public
– Both Singapore’s and Indonesia’s exchanges are set to allow SPACs
– Several South-east Asian tech unicorns may use SPACs to list publicly
South-east Asia is seeing a wave of interest in special purpose acquisition companies, or SPACs, with various major tech players considering them as a means to fast-track public listings. In parallel to this, several exchanges in the region are moving to allow SPAC listings, with a view to boosting post-coronavirus growth.
SPACs are shell companies set up by investors and then listed on a given stock exchange. Their sole function is to acquire a private company, enabling it to go public without having to go through a traditional initial public offering (IPO).
A SPAC does nothing beyond its essential function – it neither produces nor sells anything, and a SPAC’s only assets are the funds raised from its own IPO.
Crucially, people who buy into a SPAC do not know what its eventual acquisition target or targets will be. This is why SPACs are often referred to as “blank cheque companies”: they give the founders a free rein to back their choice of private company. A key feature of SPACs is that they are often headed by big-name business executives or fund managers, who trade on past successes to inspire trust in investors.
While they are far from a novel phenomenon, SPACs have become a hot button topic in recent times: SPAC initial offerings quadrupled last year, with the vehicles raising a record $80bn.
Merging with a SPAC enables a company to go public and raise capital more quickly and painlessly than with a traditional IPO, circumventing some of the volatility that Covid-19 unleashed on global markets. At the same time, they function rather like venture capital, helping investors to buy into high-growth start-ups on the ground floor.
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