PHOENIX—As goes the high-tech industry, so goes opportunity.Once a high-tech company anchors a neighborhood, housing pricesrise, new amenities spring up and unemployment dips.JLL's latest High-Technology OfficeOutlook reveals where high-tech companies are looking for(and finding) reasonably priced labor and real estate, and how newand unexpected markets like suburban Phoenix are getting a piece ofthe action—and a second economic wind.

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“Tech companies are looking for new locations for many reasons,not just for intellectual capital, or venture capital funding butother factors such as standard of living,” saysJulia Georgules, co-lead of JLL'sTechnology research group. “In our research, we callthis 'market dynamism.' We have looked at different lifestylefactors for each of the 34 tech hubs, including proximity totransport and walkable amenities.”

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JLL's report, which helps high-tech companies make informedexpansion decisions and provides insight for investors, featuresthe top 34 high-tech markets across the country, includingPhoenix.

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While the high-tech industry's growth is driving employers tofind new locations for both talent and real estate, traditionalhigh-tech cities are not exactly struggling. Long-standing hubscontinue to function as the industry's economic engines; in fact,seven traditionally high-tech-centric markets represent more than afifth (21.7 percent) of the 65.4 million square feet of officespace under construction across the country. Still, looking beyondthe top tier locations is when the economic story getsinteresting.

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As rents escalate and space becomes scarce in mainstay marketslike San Francisco, Silicon Valley and Manhattan, the lure of moreaffordable prices have high-tech companies seeking talent and realestate elsewhere. The savings potential is huge: downtown PaloAlto, considered the heart of Silicon Valley, has seen such highdemand that the office market is just 3.6 percent vacant withaverage asking rents at $86 per square foot compared to thenational average of $30. In comparison, the average askingrent for high-tech office space in Phoenix is $21.11 per squarefoot. Twenty six percent of the total supply is available, and 2.3million new square feet is under construction.

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“High-tech's growth is not exclusive to traditional high-techmarkets anymore,” says CaraTrani, co-lead of JLL's technology brokeragegroup. “High-tech clusters have become much more common ashigh-tech innovations form the backbone of new product developmentin all industries.”

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“The race is on among cities vying to become 'the next SiliconValley.' As a result, more incentives and tax credits becomeavailable to lure high-tech companies into markets that are in needof jobs and economic growth,” she concludes.

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Along with emerging high-tech centers like Detroit, Charlotte,and Indianapolis, Phoenix, and particularly its Southeast Valleysuburbs, are holding their own.

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“Phoenix is definitely an emerging high-tech market,” saysAndrew Medley, vice president, tenant relations inthe Phoenix office of JLL. “The most interesting part of thisgrowth may be the building locations themselves—a huge percentageare in suburban markets like Chandler, Tempe and South Scottsdale.These are places that are known for young, educated families andquality of life. When Apple moved here, they did not go into thecore. They went to Mesa and introduced hundreds upon hundreds ofnew jobs. The same can be said for many other companies… Intel,Honeywell, GoDaddy, InfusionSoft. The list goes on and on.”

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According to the annual report, high-tech companies are alsotaking advantage of Phoenix's local business incentives that makePhoenix an affordable alternative to other markets. The report alsonods to employment generators like Arizona State University,University of Arizona and other respected local colleges.

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“Phoenix's current high-tech employment concentration isdominated by jobs in computer and electronic products,” addsMedley. “This makes up about half of our local high-tech jobs.Another third is in computer systems design and services.”

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“When start-ups and established high-tech companies look toexpand, understanding the dynamics of local markets and innovationclusters is essential,” says Greg Matter, co-leadof JLL's Technology brokerage group. “While it's common forcompanies to look at just one factor, such as high-tech employment,when considering new market expansions, JLL's index shows thedecision should have greater depth. Each city has its own uniquequalities that should be aligned with a company's growthobjectives. Companies should look at each location's talent pool,for example, and ask, how are investment conditions? Do we needspace to expand? What are the amenities and lifestyle factors foremployees?”

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