CHICAGO—The nation's long run of economic growth has already lasted significantly longer than many past expansions, and this has caused some observers to worry that a recession is just around the corner. But whenever the economy does begin to plateau or even decline, those cities and regions with the strongest tech markets are far more likely to weather the storm, according to JLL's latest Tech Office Outlook report. In fact, the Chicago-based firm found that tech sector growth continues to outpace the national economy and create strong real estate conditions across the country.

Company researchers studied the office leasing activity in 45 top US metro areas for leases of 20,000 square feet or more, and the data show the technology sector drove nearly 25% of this activity over the past two years. Furthermore, 63% of the tech leases involved expansions, compared to about 48% of leases overall.

And this demand has given landlords the opportunity to boost rental rates. Not surprisingly, the most expensive rents can be found in San Francisco Peninsula's Menlo Park, at $102.16 per square foot; Palo Alto in Silicon Valley at $100.79; San Francisco's Mission Bay/China Basin at $84.70; followed by Hudson Square in New York at $83.11.

The researchers also noted a 9.6% dip in second quarter leasing activity, but say that represents a return to normal after several years of rapid expansion among tech firms.

“A healthy tech sector, particularly a 'hub' that anchors a vibrant tech ecosystem, has become the hallmark of a strong local economy,” says Steffen Kammerer, senior vice president and leader of JLL's technology group. “Tech employment growth continues but this past year has brought people back down to reality; it still outpaces US employment growth by more than two to one after an astronomical four to one in 2014 and 2015.”

“Another sign of strength is that CEOs remain unwilling to negotiate on location. They're willing to pay a premium for resilient markets with a rich blend of talent, innovation and economic momentum. And they're also willing to tap into new, promising economies for expansion,” he adds.

But even though the tech sector remains remarkably strong, JLL decided to design some metrics that would help investors identify the markets that can withstand weak economic cycles. The company selected 16 variables across four major categories – including economic momentum, talent pool, innovation and cost. The higher the score, the more resilient the market. The top five locations include:

1. Silicon Valley; Market Score 95.4: “Despite the rising cost of living, demand for new office development has yet to slow, providing more options for established tech tenants in the market,” the report says.

2. San Francisco; Market Score 87.3: “San Francisco remains a highly resilient market. However, discrepancy between public and private valuations, poor IPO performance, and general market volatility has dampened deal flow. But access to talent, funding, and amenities provide a base for sustained growth.”

3. Austin; Market Score 84.2: “Austin metro attracting both people and companies (including major Google and Facebook expansions), with 157 new people moving in per day.”

4. Seattle-Bellevue; Market Score 82.3: “As one of the best markets in the country for STEM grads, its thriving job market, unique natural environment, and restaurant scene make it a top destination for millennials.”

5. Boston; Market Score 82.2: “Maintaining its spot with the nation's second largest volume of tech employees, Boston's highly-educated workforce continues to be a major draw for employers, seeking talent, financial resources, and innovation.”

“Not just any valley will do, but newer tech hubs can also be resilient, like Minneapolis, Northern Virginia, Dallas and Atlanta,” says Kammerer. “Additionally, San Francisco, Austin, Seattle-Bellevue, and Boston share many of the same qualities as Silicon Valley today with highly educated populations, active patent activity, and strong net migration.”

The researchers also noted a 9.6% dip in second quarter leasing activity, but say that represents a return to normal after several years of rapid expansion among tech firms.

3. Austin; Market Score 84.2: “Austin metro attracting both people and companies (including major Google and Facebook expansions), with 157 new people moving in per day.”

Instant Insights /

US Tech Remains Vibrant, and Provides Resilience to Top Markets

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