More Tech Jobs in Bay Area Than Anywhere Else

SAN JOSE—Technology’s impact on commercial real estate has been building since the financial crisis of 2008. The trend of start-ups and tech companies occupying large spaces in metropolitan areas is occurring all over North America and especially in tech-vital cities. So says Cushman & Wakefield’s annual report, Tech Cities 2.0, that identifies existing and emerging tech centers increasingly driving the North American economy and impacting the commercial real estate sector.

A follow up from last year’s inaugural Tech Cities 1.0 report, this year’s research reviewed all major North American markets, combining employment, occupations, venture capital investment and demographics statistics, and groups the top cities into three categories based on how important the tech sector is to the local economy and real estate market: tech is a critical component of the local economy and CRE market, tech is a key driver of the local economy and CRE market, tech is important to the local economy and CRE market, but of course there are other important sectors as well.

“As tech companies continue to dominate headlines and grow, a key question is how this affects commercial real estate. Building upon our inaugural Tech Cities report from last year, Tech Cities 2.0 offers new data and a further in-depth analysis of the marketplace,” says Revathi Greenwood, Cushman & Wakefield’s Americas head of research. “Tech is no longer limited to just traditional technology companies–media companies, retailers and even law firms are competing for the same spaces and talent as traditional tech companies. While the result can be seen in nationwide trends, we’ve identified key insights that impact companies across every industry.”

Ken McCarthy, Cushman & Wakefield’s principal economist and applied research lead for the US, says Tech Cities 2.0 demonstrates the profound impact the tech sector has had on commercial real estate.

“Although we expect established markets like Silicon Valley to see continued investment, new tech hubs are emerging across North America, from Provo to Philadelphia, sustaining a period of tech-driven economic growth unseen since the dot-com boom of the late 1990s,” McCarthy says. “If Silicon Valley is the brains of the tech sector, then New York City is the creative center.”

The tech industry has changed the way its companies and also those traditionally non-tech firms approach commercial real estate, says Robert Sammons, Cushman & Wakefield’s senior director, Northern California research.

“Both start-ups and big tech companies have recognized they need a footprint in the central cities to keep attracting Millennial workers, and as a result, they are taking large chunks of high-rise buildings and trophy assets in dense urban areas, in addition to keeping their sprawling campuses in the suburbs,” Sammons said.

As well, he added that tech companies are driving demand as they continue to hunt for space and grabbing it in certain hot markets when they can find it.

“With unemployment at 4% or lower in each of these markets, tech companies of all sizes are in a war for talent and must do their utmost to hold on to and recruit employees–and that means the best salaries, the best incentives, the best space and the best location,” he says. “That last point has generally meant an urban or even suburban location that is mixed use, walkable, bikeable and near mass transit.”

Other interesting factoids from the report show that 42% of the square footage in the top 100 leases in North America was signed by tech companies in the first of half of last year. And, the fastest-growing tech employment market since 2010 is Provo, UT. Though a smaller market than the others on the list, the number of people employed by tech companies increased 64.9%, surpassing the 62.7% increase in San Francisco. The top four cities for new construction include Austin, Raleigh/Durham, NC, Seattle and San Francisco.

Property and rent prices are skyrocketing. Average asking rents in cities such as Atlanta, Austin, Seattle and San Francisco have increased more than 50% since 2010. And, among the top 25, property prices have increased on average by 59%, with the greatest increases happening in Austin, Silicon Valley and San Francisco.

“Tech is further entrenched into essentially every industry today and continues to expand rapidly, while due to its tech prowess, the San Francisco Bay Area has remained front and center of our current longstanding economic growth and expansion, as it had the prior expansion cycles,” says Sammons. “Silicon Valley, of course, is thought of as the birthplace of tech and remains a hub for some of the biggest and most influential players in the field. San Francisco, with its startup culture, has seen a number of homegrown companies grow up and also stay here. Combined, there are more jobs at tech companies here than anywhere else in the US.”

Indeed, both Silicon Valley and San Francisco fit into the second category of the report: tech is a critical component of the local economy and CRE market.

“Silicon Valley creates the ideal ecosystem for the world’s most influential technology companies to reside and flourish,” says Julie Leiker, Cushman & Wakefield’s market director for Silicon Valley. “From the largest tech companies in the world to the start-up with the next new idea, all benefit from Silicon Valley’s dynamic atmosphere of elite talent, world class higher education systems, and deep venture capital enabling continued growth and innovation.”

Silicon Valley companies continue to evolve as technology becomes more ubiquitous in everyday life and breakthrough products produced here in the land of innovation are experienced daily across the globe. One prime example of our latest local revolutionary tech growth—in terms of not only business and product but also real estate—has stemmed from autonomous vehicles and the expectation for emerging auto related technologies. These innovations continue to expand as the car transforms from a transportation system to a mobile workspace capable of driving itself while unlocking previously unrecognized productivity time for passengers, says Sammons.

In addition to transportation-related innovations and transit-oriented developments, in many respects, Bay Area cities have taken the lead in sustainability.

“Cities like Fremont are making great strides in mandating green construction, promoting installation of solar, and expanding recycling programs, water conservation and transit-oriented developments to reduce automobile trips and greenhouse emissions. A model city, Fremont’s vision statement for general plan 2030 states, ‘Fremont will serve as a national model of how an auto-oriented suburb can evolve into a sustainable, strategically urban, modern city.’ Cities will continue to push for more sustainable developments as concerns about the lack of water and renewable resources remain a top priority,” Jonathan Boriack, associate principal for KTGY Architecture + Planning, tells GlobeSt.com.

For more information on real estate technology, join GlobeSt.com at RealShare Apartments in Los Angeles from October 29-30, 2018. This year, GlobeSt.com and CRETech are coming together to present two highly engaging sessions that highlight cutting-edge technology solutions at RealShare Apartments. These interactive and entertaining discussions will provide key takeaways and practical insights from top technology innovators and top adopters in the multifamily industry. Register for RealShare Apartments.