How tech companies choose between Asia Pacific cities

Three main factors drive tech location choice

Jun 29, 2017, 5:36 PM

Technology is rapidly evolving in Asia Pacific (APAC) and the tech sector has matured dramatically. Technology companies are now one of the most important types of tenants in the region. They’re occupying huge chunks of office space in APAC markets, and more are moving into Class A space in particular.

Similar to the Bay Area, dense clusters of technology companies have popped up, including notable examples Shenzhen and Bengaluru (Bangalore).

View the map below for areas where tech companies account for 20% or more of business park and office markets. You can also see the biggest tech segment for most markets.


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With so many options, how do companies pick the right location?

A survey of tech companies in 17 Asia Pacific markets found that most are looking at wage and real estate costs, local population education levels, and government policy incentives.

But the factors that influence their location choice the most are highly dependent on the nature of their business. Ecommerce, for example, is more concerned with costs, where hardware companies are looking for laws that protect intellectual property.

Download the full report for a deeper dive into what drives location decisions for Asia Pacific tech companies or keep scrolling for an overview of the top 3 factors to consider.





Though location strategies certainly vary by company and sector, three intra-regional factors emerged as top concerns.


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Talent

Survey results show that choosing the right office location is imperative to hiring the right talent, and that market size is the most important comparative advantage within Asia Pacific.

This explains why markets such as China and India, with their large populations, are key to the Asia Pacific strategy of many tech companies. Within these large populations are a higher availability of skilled talent. Tech firms recognize how important hiring and retaining key talent is to the success of their business, and with so many tech hubs in the region, picking a spot where people are happy to spend much of their work life is critical.

Government policy

Supportive government policy was the second most important driver in the markets we surveyed. In response to the remarkable technological and economic contributions made by companies in areas like Silicon Valley, many Asia Pacific governments have taken steps to try and replicate that success in their own countries.

In the technology hub Zhongguancun in Beijing, tax holidays were introduced. Qualifying technology companies start out at a lower tax rate and typically follow a graduated tax schedule. When tied to a particular location, such incentives can have a strong influence on where firms from a particular industry cluster within a market. While supportive policy helps foster growth, it’s worth noting that government incentives alone aren’t sufficient.

Cost

Historically, tech firms have had a reputation as a relatively cost-sensitive occupier category. Our survey results confirm that affordability, the number three driver, remains an important role in location choice.

Some commentators have noted that tech firms’ sensitivity to real estate costs is associated with the payoff period typical of their industry. For example, online marketplaces typically reinvest their discretionary income early in their lifecycle in order to expand their network and distribution capabilities. This means they have a much longer period to profitability and hence higher sensitivity to costs early on.


For an in-depth overview of location strategies in the Asia Pacific tech market download the full report. Or view our follow-up report below that maps out specific tech clusters.


Where are Asia Pacific tech clusters?

APAC cities are massive compared to U.S. tech hubs – even three times as large in many cases. The demand is different and more spread out.

Click to download and see where pockets of tech are located in mega cities and highly diverse markets.



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Tech around the world

View tech activity in Canada, Guadalajara and London.