CBRE: Secondary Markets Popular with Tech Workers, Employers

While San Francisco remains the nation’s leading technology market, many highly skilled workers–especially millennials–and their employers are now choosing cities with both tech jobs and lower living costs, reported CBRE, Los Angeles.

CBRE’s Scoring Tech Talent report ranked 50 U.S. and Canadian markets on their ability to attract and grow technology talent.

“Tech talent markets share several distinct characteristics, including high concentrations of college-educated workers, major universities producing tech graduates and large millennial populations,” said CBRE Director of Research and Analysis Colin Yasukochi. “The robust entrance of millennials into the labor pool contributed greatly to the growth in tech talent across all 50 downtown markets.”

In their quest for skilled talent and a lower cost of doing business, both new and expanding companies are establishing footprints in more affordable markets including Nashville, Tenn., Charlotte, N.C., Tampa, Fla., Seattle and Phoenix, which leads to increasing office-space demand in these markets, Yasukochi said.

Established tech markets such as the San Francisco Bay Area and Washington, D.C. again dominated the top spots on CBRE’s list this year. But small markets took dominant positions on CBRE’s “momentum markets” list, which ranks cities based on tech talent growth rates between 2010 and 2015. Charlotte and Nashville saw tech talent growth rate increases of 75 percent and 68 percent, respectively, the report said.

Yasukochi said tech talent growth recently became the top office-leasing driver in the U.S. “and high-tech companies are now one of the main drivers of commercial real estate activity.”

High-tech companies’ share of major leasing activity increased from 11 percent in 2011 to 18 percent in 2015, Yasukochi said–the largest single share of any industry. Many technology markets have seen rising rents and declining vacancies as a result. 

“Significant demand for office space in top markets that have added tens of thousands of workers during the past five years raised rents to their highest levels and pushed down vacancy rates to their lowest,” the report said. “Rent growth is most prominent in the large tech markets–office rents in the San Francisco Bay Area nearly double what they were five years ago. But the decrease in vacancy rate is present across both large and small tech markets, with the Nashville vacancy rate the lowest of the top 50 tech talent markets.” 

Of the 50 markets CBRE analyzed, those experiencing the largest rent cost increases between 2011 and 2016 included the San Francisco Bay Area (+95 percent), New York (+46 percent), Austin (+30 percent), Boston (+27 percent) and Denver (+27 percent). Tech markets experiencing the largest office vacancy rate decreases during the same time period include Austin (-12.2 percentage points), Toronto (-12.1 percentage points), Vancouver (-10.1 percentage points), Tampa (-9.2 percentage points) and Charlotte (-8 percentage points).