Singapore behind nine other cities in startup cost for tech firms: survey

Singapore

REAL estate costs don't amount to too much if you're thinking about starting a technology business in Singapore. Relatively speaking.

Among 27 cities studied by Knight Frank in its new research, Singapore came in as the 10th most expensive city to start a tech company.

This is calculated by adding the cost of renting a 600 square foot office in the tech and creative district (One North, in this case) to fit-out costs and agent fees.

It will be 40 per cent cheaper if one is willing to forgo some privacy by switching to a co-working space, which is a shared working environment that offers flexibility, support and infrastructure for nascent companies.

There are currently about 55 co-working operators in Singapore, with some offering options near the city centre such as the Bras Basah and Tanjong Pagar areas.

In Asia, globally renowned co-working operators such as WeWork have recently expanded here, while local incubators also offer co-sharing spaces for tech and creative start-ups.

According to Knight Frank's research, London tops the rankings as the city where tech start-ups face the highest real estate costs, followed by New York and San Francisco.

Hong Kong, Beijing and Singapore are the only Asian cities in the top 10 chart. For a tech start-up setting up in these Asian cities, the rental costs would be over 40 per cent less than London.

In a discussion with reporters on Thursday, Knight Frank's Asia-Pacific research head Nicholas Holt cautioned that looking at like-for-like tech clusters in cities is "not exact science". One North is not completely comparable to, say, Shoreditch in London, or Brooklyn in New York, he said.

Calvin Yeo, executive director and head of office advisory at Knight Frank Singapore, also noted a reversal of a trend from two years ago, when rapidly expanding tech firms were at the time bullishly picking up space in the central business district (CBD) that was being let go by banks and financial institutions that were consolidating their businesses. Not any more.

Google last month moved to Mapletree Business City II from Asia Square Tower One. Earlier this year, Apple also started leasing business park space at Innovis in Fusionopolis Two in the One North area. And last year, Facebook vacated its Cecil Street premises to relocate to the newly built South Beach Tower, near the Suntec City commercial hub.

To most, One North appears to be the next emerging city-fringe precinct that is rising in popularity. It occupies 185 hectares of land area and houses a range of companies from biosciences, research and development institutes, multinational corporations, such as Volvo and Shell, to firms from the TMT (telecommunications, media and technology) sector.

Mr Holt pointed out that such trends - of tech firms moving in and out of CBDs - differ from city to city. The dynamics in San Francisco and Shanghai differ from Singapore in this regard, for example.

He noted that some tech firms are actually moving out of Silicon Valley, the tech hub of the world, to the San Francisco Bay Area because their employees want to live and work there.

Similarly in the Zhangjiang Hi-Tech Park, which is in a decentralised area in the Pudong district of Shanghai, tech firms that are doing well and financially healthy are also moving to the CBD. "We didn't think that was going to happen. It's really city specific," he said.

In the Singapore context, Mr Yeo said tech firms enjoy an obvious rental cost advantage in city-fringe tech districts like One North where rents hover around S$5 per square foot (psf), versus S$8 to S$9 psf in the CBD.

For "post start-ups" - what start-ups become when they have outgrown their premises, or when co-working areas pose privacy concerns - some may also look to migrate to technology and creative business parks, or hybrid co-working buildings that offer a combination of fixed and flexible lease arrangements.

This means, for example, that while they house their finance and corporate functions under a traditional lease, other more transient work groups may be put under a flexible lease - depending on whether a particular project pans out or not.