Tech Industry’s Office Leasing Share Tops 20%

San Francisco has seen double-digit tech office rent growth over the past two years.

CBRE, Los Angeles, said the tech sector is claiming a growing share of major U.S. office-leasing activity as indicators point to continued momentum for the sector over the next two years.

The firm’s annual Tech-30 report measures the tech sector’s effect on office rents in the 30 largest American and Canadian tech markets. It said tech companies accounted for 21 percent of major office-leasing activity in 2019’s first half, up from 11 percent in 2011.

The tech sector’s robust job growth–more than double the national job-growth rate–is fueling strong leasing activity, CBRE said.

“The North American tech industry has diversified its economic base as it has grown, expanding its presence in many Tech-30 markets,” said CBRE Executive Director for Research Colin Yasukochi. He called large tech companies “an ongoing source of demand,” noting the 10 most active tech companies leasing office space since 2013 account for nearly 30 percent of overall tech industry leasing.

Office rent growth has been strong for the Tech-30 in the past two years, with 10 markets posting double-digit percentage growth in average rents over this period, led by San Francisco. Rents increased in 28 of the Tech-30 markets since 2017, CBRE reported.

“In markets like the Tech-30, technology job growth is a strong indicator of office rent growth,” said CBRE Director of Research and Analysis Lexi Russell. “We’ve seen this for many years in tech capitals such as Silicon Valley and Seattle, but it’s also true in next-generation tech markets like Charlotte and Atlanta as well as rising tech markets like Ottawa (Ontario) and Kansas City.”

CBRE pointed to high levels of venture capital investment and the steady climb of the Nasdaq index as leading indicators of high-tech employment patterns and, by extension, demand for office space.

The Tech-30 report also examined rent gains, rent premiums and net absorption in submarkets that have emerged as tech hot spots within their cities. It found these tech submarkets registered a 14 percent office rent premium compared to the average in their respective cities. Among the tech-friendly submarkets with the biggest rent growth in the past two years: Midtown Atlanta (+28.1 percent), Raleigh-Durham, N.C.’s Research Triangle Park/I-40 Corridor (+24.1 percent) and downtown Nashville (+19.4 percent). The report indicated Portland, Ore., Raleigh-Durham, Atlanta, Washington, D.C. and San Diego all offer high potential for investors due to their attractiveness to occupiers, affordable office rents and growing high-tech labor pool.