As Chinese Tech Firms Shun Australia, Singapore Could Benefit

As Chinese Tech Firms Shun Australia, Singapore Could Benefit

AUSTRALIA – The virus outbreak has significantly impacted the country’s office property market, with vacancy levels in cities like Sydney spiking. However, the situation was made worse by the frosty ties between Beijing and Canberra, reported the South China Morning Post (SCMP) on Tuesday morning (8 June, SGT).

“The recent political tension between Australia and China may be an obstacle for Chinese tech companies to increase their footprint in Australia,” commented Sing Tien Foo, Director at the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore (NUS).

As such, he believes that Chinese tech firms are unlikely to expand or take up more office space in Australia over the short-term.

In February 2021, real estate consultancy Colliers published a study, in which it forecasted that tech firms are expected to lease more than 5.5 million sq m of office space, or about one-fifth of the workspace in the Asia Pacific (APAC) region in 2025. Of this, tech firms from mainland China are expected to account for around 4 million sq m of office space.

However, the relationship between Australia and China started souring in 2018, when the former banned Huawei from building the country’s 5G network. Ties became more belligerent recently after Canberra terminated Victoria state’s Belt and Road deal with China, and Major General Adam Findlay told Australia’s special forces to be ready for a potential conflict with China over Taiwan.

The situation of Australia’s office market could have been better if tech firms from mainland China were not giving Australia the cold shoulder, noted Knight Frank’s Research Head for Asia Pacific Christine Li, adding Chinese tech firms may find Southeast Asia’s market more appealing than Australia.

Moreover, Australia’s loss could be Singapore’s gain as the city-state is viewed as a beachhead to the rest of Southeast Asia, which has a total population of 655.3 million, many of whom are smartphone-savvy, compared to Australia’s 25.4 million.

Consequently, many Chinese tech firms have leased or bought office space in Singapore. Last year, Alibaba acquired a 50 percent stake in AXA Tower that values the commercial property at S$1.68 billion.

ByteDance has leased 58,000 sq ft at Guoco Tower and another 100,000 sq ft at One Raffles Quay South Tower, while Tencent took up 200 seats at JustCo’s coworking space at the OCBC Centre East at Raffles Place.

“The TMT (technology, media, and telecommunications) sector is rapidly expanding in tandem with the growth of consumer tech in the Asia Pacific markets given its long term fundamentals such as a generally young population and the rapid rise of the middle class,” noted Li.

“As such, it has been a growing source of demand for commercial office space across many APAC markets. In particular, Singapore has benefitted more given its ability to attract many TMT corporate headquarters as a foothold to grow within Southeast Asia,” she added.

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