CoreNet Global: Survey Shows that Access to Growing Markets, Existence of Local Talent and Cost are the Most Important Factors that Companies Consider when Locating Facilities in Asia

CoreNet Global: Survey Shows that Access to Growing Markets, Existence of Local Talent and Cost are the Most Important Factors that Companies Consider when Locating Facilities in Asia

Press Release
March 11, 2015

CoreNet Global: Survey Shows That Access to Growing Markets, Existence of Local Talent and Cost Are The Most Important Factors That Companies Consider When Locating Facilities In Asia

March 11, 2015 – Hong Kong – Access to growing markets and the need for talent are among the most important factors that corporate real estate executives consider when selecting locations in Asia, according to a new survey. The risk of political instability and rising rents are among the factors that may hinder a move or expansion in Asia, according the survey, which was conducted by CoreNet Global, the world’s leading professional association for corporate real estate (CRE) and workplace executives, service providers and economic developers.

Singapore and Hong Kong remain the cities of choice for international corporates seeking to locate offices facilities in Asia Pacific and Singapore will continue to occupy the top spot for years to come.

Asked if Hong Kong or Singapore had the greatest advantages for locating offices or facilities in the region, the overwhelming majority (80%) picked the Lion City. Furthermore, almost the same number (76%) say that Singapore will still be more attractive for commercial real estate in 2020.

Still, Hong Kong, out of 15 cities in Asia Pacific, ranked as the second most receptive to new corporate real estate locations. Mumbai and Sydney tied in third place, with Shanghai fifth place, the highest ranked mainland Chinese city. Shenzhen followed in sixth, beating other major regional capitals such as Tokyo, Seoul and Kuala Lumpur.

Real estate professionals were virtually unanimous (95%) in picking rapidly rising rents as the biggest drawback to locating in Hong Kong. The lack of space (80%) and higher compensation (60%) were identified as the other biggest challenges to setting up offices or facilities there.

With the exception of Shanghai, cities on the mainland of the region’s economic superpower, China, are still perceived by industry professionals as being less attractive for corporate real estate than other major regional cities. Out of 15 cities, only Bangkok ranked lower than Chongqing and Beijing as being a receptive city for locating new corporate real estate.

Of the 85% of respondents that have regional headquarters or facilities in Asia, 73% see access to growing markets in Asia as the most important factor which attracts them to locate new facilities in Asia, followed by cost (59%) and the supply of talent (55%).

Asked to identify in which regional cities real estate professionals will be most likely to add new facilities or operations within the next two years, Bangalore was the clear winner (40%).

Professionals are split on the question of new commercial hubs emerging in Asia. Asked if they thought Hong Kong and Singapore’s status as the key hubs will change by 2020, 40% said they will be even more than today, while the same proportion said they will lose relative influence to other Asian cities such as Shanghai.

Commenting on the survey findings, Erwin Chong, Head of CoreNet’s Singapore Chapter said:

“Asia Pacific is the world’s engine of economic growth and therefore it continues to act as a magnet for multinationals locating their corporate facilities. But there is a wide disparity in the relative appeal of cities across the region and even within countries.

“Singapore’s status as the most attractive destination for corporate real estate is due to a variety of factors, including its favorable tax and regulatory regime, its strong rule of law and its access to the fast growing emerging markets of Southeast Asia.

“Hong Kong may have missed out on the top spot and its high rents are a major disadvantage, but it remains an undisputed commercial and financial hub in the region.

Commenting on what Chinese cities should be doing to make themselves more attractive international real estate destinations, Chong added:

“While China is unquestionably the region’s economic superpower, its mainland cities have to work harder to make themselves more attractive to multinationals locating new facilities. Indian cities are rated more highly and are preferred when compared to mainland Chinese cities.

“China's Tier 1 cities such as Beijing, Guangzhou, Tianjin and Chongqing will continue to become centers of commercial real estate for domestic large China corporates. But multinationals looking to build or invest in commercial real estate are plagued with a reduction of FDI into these cities, due to rising costs of wages and manufacturing production costs, therefore reducing overall demand for buildings.

“To remain attractive, these cities have to continue to differentiate their real estate stock and improve the infrastructure and building qualities, with the aim of maintaining a steady rental profile to be lower than cities such as Shanghai.

“These cities have to continue to brand themselves as hubs for industries such as financial services, manufacturing or technology to allow them to compete against the more established Shanghai. For Beijing, more must be done to reduce pollution levels, are a real problem for the capital’s international reputation."

“I am very much looking forward to hearing the views of my peers and discussing the key industry issues at the upcoming 2015 CoreNet Global Asia Pacific Summit.”

The results are timely for corporate real estate executives in Asia Pacific as CoreNet Global prepares to host the 2015 CoreNet Global Asia Pacific Summit in Hong Kong between 17 and 19 March 2015 at the Kowloon Shangri-La Hotel. The foremost corporate real estate (CRE) Summit will attract over 400 corporate real estate executives from around the world and will look at cutting-edge technologies, as well as new and creative CRE solutions in Asia Pacific.

Notes to Editors

Survey Methodology

In the first quarter of 2015, CoreNet Global developed a questionnaire for the purpose of gathering data of economic development with respect to corporate real estate in Asia. The questionnaire included a number of questions that breakdown which cities are preferred locations to expand offices/facilities and the rationale behind them.

About CoreNet Global

CoreNet Global is the world’s leading professional association for corporate real estate (CRE) and workplace executives, service providers and economic developers. CoreNet Global’s 9,000 members, who include 70% of the top 100 U.S. companies and nearly half of the Global 2000, meet locally, globally and virtually to develop networks, share knowledge, learn and thrive professionally. For more information, please visit www.corenetglobal.org

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FTI Consulting
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