Internet firms become a force in office leasing market in Asia
Despite increased demand for offices, technology sector still overshadowed by finance firms in HK
Internet firms have emerged as a key driver of office leasing activity in Asia but finance companies remain the most active tenant group in Hong Kong, according to property consultants.
The technology, media and telecommunications sector is relatively small in Hong Kong, said Gavin Morgan, chief operating officer and head of leasing at JLL.
While the sector has become more active over the 12 months to June this year, its requirements are still relatively small compared with the needs of firms in banking, finance and business services, Morgan said.
In Hong Kong, LinkedIn increased its serviced office space to 16,500 sq ft during the period, while Google moved up from 10,000 sq ft to 27,000 sq ft. Facebook increased its serviced office space to 11,000 sq ft. The sector accounted for just 6 per cent of all new lettings over the period, JLL said.
However, in the broader Asian market, internet companies accounted for an estimated 20 per cent of the space taken up in the second quarter of this year, according to a report by property consultants Cushman & Wakefield. The increased uptake reflected efforts by social media platforms and e-commerce businesses to establish themselves in the region's key hubs. Financial companies were responsible for about 15 per cent of the additional space in the quarter, the consultancy said.
While some hi-tech firms like Google have displayed a stronger appetite in taking up space, the trend is not sector-wide.
"There are some booming hi-tech companies such as Google or even startups such as LinkedIn and Facebook who are actively in demand of space and are willing to a pay premium for quality space, However, the more mature hi-tech sector, including companies such as IBM, Microsoft and HP, are focusing more on portfolio optimisation," said Ivy Tai, associate director of CBRE Office Services. "They are trying to drive more efficiency from their existing footprint as opposed to going out to acquire new space."
Moreover, the type of space required by the technology sector differs to that needed by financial firms, in terms of location and technical provisions. Some financial firms from mainland China have taken up grade A office space in Central, while most of the technology companies are in Causeway Bay, Quarry Bay, Wan Chai or Cyberport, Tai said.
"Demand from the tech sector is a mixed bag at the moment as currently only several larger and well-known international firms are in expansion mode, but there was little in the way of new activity, overall speaking," Tai said.
In the broader occupier market during the period, demand improved slightly but generally remained weak. Overall net absorption slowed further when compared with a year ago.