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More MNCs choosing to buy offices over leasing
By Cherry Cao

MULTINATIONAL companies are increasingly investing in offices on the Chinese mainland and India with those in the BFSI (banking, financial services and insurance), ITES (information technology enabled services), FMCG (fast moving consumer goods) and pharmaceutical sectors being the most vibrant buyers in these markets, Cushman & Wakefield, the world’s largest privately held commercial real estate services company, said in a latest report.

“Companies that have well-established operations in the Chinese mainland are increasingly confident of their future in the country and are now tailoring their real estate requirements with a longer term view, creating cost efficiencies due to their strong commitment,” said James Shepherd, executive director and head of research for Cushman & Wakefield’s China operation.


“And as the Business Park trend gains momentum across the country, companies in specific industries such as pharmaceuticals and IT may often consolidate their research and development divisions with their front-end operations in a single location, a strategy that may enable occupiers to procure real estate that is cost effective but also reduces the risk of significant rental hikes in the future,” said Shepherd.

In Shanghai, there are a few “business park” areas — Caohejing Hi-tech Park, Fenglin Life Sciences Park and Zhangjiang Hi-tech Park, etc — that cater to multinationals, especially those looking to establish a larger (at least 10,000 square meters) headquarters or R&D center.

Several pharmaceutical companies, for instance, are looking to consolidate their operations with their R&D or laboratory functions in Shanghai. To better control future costs, MNCs are increasingly examining the option of purchasing versus leasing facilities, especially if the business is established or stable.

And to better accommodate their real estate needs, companies are also relocating out of Shanghai’s CBDs to peripheral regions. With limited availability of space in CBDs, new development areas can offer companies opportunities to potentially purchase at a lower cost — up to 30 percent lower in some cases.

Meanwhile in India, most companies showing keen interest in buying offices are from the BFSI sector, given the strong presence and long-term plans of companies in these industries. The other sectors include IT, pharmaceuticals and engineering, according to Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield.

The report has also forecast that Vietnam and the Philippines are poised to emerge as attractive destinations in the future as costs are rising in both India and the Chinese mainland.

In Vietnam and the Philippines, where the economic cycle is comparatively nascent, there are great opportunities for global giants. But just as purchasing assets became a reality in China’s mainland and India only recently, Philippines and Vietnam will also witness a similar trend after MNCs complete a few cycles of operation in the market and feel more confident about growing in the region.

“First-time entrants will still choose to lease premises in Asian emerging markets, but we expect increased traction of commercial sales led by those MNCs that have successfully run operations for a few years in specific emerging markets,” said Sigrid Zialcita, managing director of research for Asia Pacific, Cushman & Wakefield.

“India, China and the Philippines are markets that offer attractive yields and prospects for good capital value appreciation and companies stand to gain if they invest in these markets sooner rather than later to reap potential benefits, provided currency risks are managed and minimized.”


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