Tech-Thirty 2015: Measures Tech Industry’s Impact Office Markets
03 Sep, 2015
New report from CBRE Group, Inc. shows office rent premiums as high as 87 percent in some of North America’s top tech submarkets, though discounts can still be found in emerging tech markets.
HOW WELL IS THE TECH INDUSTRY PERFORMING?
The high-tech software/services industry created 730,000 new jobs at a growth rate of 34% since 2009—one-fifth of all new office-using jobs. The sector was also the leading driver of U.S. office market demand, accounting for 20% of major leasing activity in 2015.
WHAT IS THE TOP-RANKED TECH-THIRTY CITY?
San Francisco topped the Tech-Thirty office markets list for four straight years; its high-tech job base (43%) and office rents (31%) grew at the fastest rate over the past two years. Phoenix shared the top high-tech job growth rate of 43% with San Francisco, but created 4,300 fewer new jobs.
WHERE TO FIND HIGH-TECH INDUSTRY MOMENTUM MARKETS?
Twenty-four markets exceeded the U.S. high-tech software/services job growth rate of 5.7% between 2012 and 2014, with Austin (33%), Silicon Valley (27%) and Nashville (23%) joining San Francisco and Phoenix to round out the top five.
WHICH CITIES LEAD THE TECH-THIRTY OFFICE MARKETS?
Sixteen markets posted double-digit rent growth over the past two years, led by San Francisco (31%), Silicon Valley (28%), Raleigh-Durham (23%), San Francisco Peninsula (21%) and Vancouver (18%).
WHERE ARE THE RENT PREMIUMS/DISCOUNTS?
The strong performance of high-tech submarkets led to substantial rent premiums over the entire Tech-Thirty office market—the aggregate premium was 11%. Within markets, premiums were as high as 87% in East Cambridge, 85% in Santa Monica and 73% in Mountain View. Discounts were also available in a number of emerging tech submarkets, including Reston/Herndon (-23%), St. Louis CBD (-17%) and Northeast Charlotte (-12%).
WHERE TO INVEST?
From an investor’s perspective, Austin, Salt Lake City, Phoenix and Portland offer further growth potential. These markets are also attractive to occupiers, although Raleigh-Durham, Dallas/Ft. Worth, Charlotte and Nashville offer the best combination of low office rents and a growing high-tech labor pool.
HOW LONG WILL THE INDUSTRY STAY STRONG?
The high-tech industry is directly supported by consumer demand and a growing number of high-tech integrated businesses, which should keep the industry strong in the years ahead and provide further support for office markets in the Tech-Thirty. Commercial real estate investors must be mindful and have realistic expectations about this historically volatile industry underpinning the health of many Tech-Thirty office markets.
Download the report.
Illustration by samuiblue at Free Digital Photos.net
