Tech Job Growth Moving to Smaller Markets

Tightening availability of tech talent in leading markets is spurring hiring momentum in smaller markets as tech employers seek additional labor pools, said CBRE, Los Angeles.

Overall, large markets still produce most tech jobs and tech degree graduates, with the Bay Area, Toronto and New York City adding the most tech jobs in the past five years. But several years of low unemployment rates have dampened the momentum of many large tech talent markets; just 15 of the 50 largest markets in CBRE’s Scoring Tech Talent report registered an accelerated pace of tech job growth, down from 23 last year.

As a result, smaller markets are absorbing some tech-labor demand. The report cited several fast-growing “opportunity markets,” led by Tucson, Ariz., with a 90 percent increase in tech jobs over five years, Hamilton, Ontario with a 52 percent gain and Las Vegas with a 35 percent gain.

Colin Yasukochi, Director of Research and Analysis with CBRE, noted the U.S. tech talent labor pool grew 16 percent over the past five years compared with nine percent growth for the overall U.S. labor pool. “That type of growth can deplete even the deepest pools of qualified labor,” he said. “Many of the opportunity markets offer quality labor pools that are untapped and have high growth potential. These markets can be ideal for small-scale operations, start-ups and tech jobs with non-tech employers like banks, media and services firms that comprise nearly two-thirds of the tech labor pool.”

CBRE said the high-tech industry accounted for 20 percent of major office-leasing activity in the first quarter–the most of any industry. The tech industry’s growth has left little available office space in large or small markets, with vacancy in single-digit percentages in the tightest markets, such as 4.6 percent in Madison, Wis., 4.7 percent in Vancouver, B.C., 5.9 percent in Charlotte and 6.1 percent in the Bay Area. That scarcity of available space has pushed up rents, especially in large markets. For example, the office lease rate in Orange County, Calif., increased 50 percent over the past five years.

So the CBRE report assessed the relative affordability of markets for employers by weighing both wages and office rents. The San Francisco Bay Area ranked as the most expensive at $59.7 million annually. The least expensive of the top 50: Montreal at $28.6 million annually.

“For tech employers, selecting an office location requires a series of tradeoffs,” Yasukochi said. “Many will pay higher rental rates and wages to ensure access to high quality talent and close proximity to certain universities and complementary companies. Many will find good talent in less expensive markets to allow their enterprise to grow nationally. Cost, education levels, tech clustering, demographics and other influences all factor into that calculation for each company.”