SAN DEIGO, CA—Robust high-tech employment has played a major role in the recovery of the US office market and has helped fuel double-digit rent growth in eight markets during the past two years.

This according to CBRE Group, Inc.'s latest research report, U.S. Tech-Twenty: Measuring Office Market Impact. 

Among the findings, San Diego experienced 3.9% growth in high tech jobs during the two-year period from 2011 to 2013 and that contributed to 15% office rent growth between Q2 2012 to Q2 2014.

The Bay Area accounted for the top three markets for rent growth – San Francisco, Silicon Valley and the San Francisco Peninsula respectively – followed by Manhattan, Denver, Austin, Boston and San Diego. Portland ranked at number 12 for overall rent growth.

The report, which tracks high-tech employment and office market conditions in 20 tech-oriented office markets across the US, found a strong correlation between high-tech job growth and accelerating office rents. Portland experienced 12.6% growth in high tech jobs during the two-year period from 2011 to 2013 and that contributed to 6.1% growth in office rents from Q2 2012 to Q2 2014.

 Markets experiencing the most growth acceleration in high tech employment during the current period (2011-2013) compared to the previous period (2010-2012) include Austin and Salt Lake City, both experiencing a 4.3% faster growth rate to 34.2% and 15.7% respectively, and Orange County at 3.5% percent to 9.3% percent. Meanwhile the overall growth rate for rents in the current period (Q2 2012 to Q2 2014) compared to the prior period (Q2 2011 to Q2 2013) was led by San Diego (13.7% percent faster to 15.0 %), Boston (12% to 11.2%), Orange County (6.7% to 5.2%) and Pittsburgh (6.5% percent). 

 According to the report, the high-tech sector has accounted for one of every four new office-using jobs nationally since 2009.  Within the Tech-Twenty markets, 10 grew their high-tech job base by more than 10%, including Austin (34%), San Francisco Peninsula (30%) and New York (23%.),

“Within preferred submarkets, which, in many cases, are the neighborhoods of choice for millennials and high-tech companies, vacant space has become increasingly scarce. As a result, nearby submarkets may see increased leasing activity by tech companies,” said Colin Yasukochi, director of research and Analysis for CBRE Global Research and Consulting.

 From an investor's perspective, San Diego, Portland, and Orange County offer the greatest potential. These markets are also attractive to occupiers, although Raleigh-Durham offers the best combination of low office rents and a growing high-tech labor pool.

Other highlights of the report include:

• High-tech was the top industry leasing office space in the U.S., accounting for 20% of major leasing activity thus far in 2014, up from 14% in 2013.

• San Francisco topped the U.S. Tech-Twenty Office Markets list for the third straight year. Over the past two years, San Francisco's high-tech job base has grown by 51%, while average asking rents have climbed 35%. The key ingredient to this “tech-effect” on the office market is the concentration of high-tech employment in each market and how dominant new high-tech job creation is relative to overall office-using employment.

• The rent premium commanded by submarkets with heavy high-tech employment is increasing. The average office rent aggregate of the Tech-Twenty submarkets was 18%  higher than the Tech-Twenty overall markets.

• CBRE's two-year outlook foresees favorable economic and job creation conditions at the national level and continued outperformance by the high-tech industry, although valuation concerns are surfacing. At the heart of high-tech's growth is strong demand for products and services from consumers. As long as high-tech companies align themselves with this demand, the unrealistic growth and valuation expectations that defined the dot-com bubble should be avoided.