Tech Sector Dominates Office Leasing

The technology sector cemented its position as a major office market driver in 2018, said Cushman & Wakefield, New York.

Ken McCarthy, Principal Economist with Cushman, noted funding for tech-related businesses “soared” last year and the number of companies valued at $1 billion or more reached a record 156. He said venture capital investments in technology nearly doubled last year to $131 billion, the largest amount invested by venture capital funds since 2000.

“With that much money being poured into the tech sector, it’s no surprise that there was also a surge in tech sector leasing during 2018,” McCarthy said. “The tech sector was by far the largest lessor of office space in the U.S.”

McCarthy said tech firms accounted for more than a quarter of the 311 million square feet of new office leases signed last year. “Tech companies continued to gobble up space at a rapid pace in 2018 and dominated leasing overall,” he said. He cited “jumbo” office leases–400,000 square feet or larger, saying there were 35 new jumbo leases totaling 20.9 million square feet signed last year. “In comparison, there was roughly half that number in 2017,” he said.

Technology firms tend to concentrate geographically, Cushman’s Spotlight on Tech Leasing report noted. “Tech companies have continued to focus on the core tech centers,” the report said. “Although tech leases were signed in 70 markets across the U.S., our leasing data demonstrates the concentration of the sector. The 10 markets with the largest volume of tech leasing were exactly where one would expect: Silicon Valley, San Francisco, New York, Seattle, Los Angeles, Washington, D.C., San Diego, Salt Lake City, Boston and central New Jersey.”

Those 10 markets accounted for three-quarters of the tech leasing, the report said. But tech firms also dominated office leasing in some unexpected places, Cushman said. In Salt Lake City, Utah, the tech sector accounted for two-thirds of the major leases signed, and in Fairfield County, Conn., tech leases represented nearly 40 percent of the major leases.