Tech's Momentum Will Continue: CBRE

SAN FRANCISCO-As a growth engine, the tech sector is in overdrive here and elsewhere, adding jobs five times faster than the national average. Research from CBRE Group says this growth trajectory is likely to continue for the foreseeable future, although the firm also notes emerging concerns that leasing momentum could slow as employment increases begin to mature.

The new report, which complements one released earlier this month on the importance of location to office-using tech tenants, makes it clear that not only occupancy has benefited from the sector's momentum. Eight tech submarkets across the US saw rent increases of 20% or better between the second quarter of 2011 and Q2 of this year.

Not surprisingly, three of those markets are in the Bay Area, led by the SoMa neighborhood of San Francisco, where rents appreciated 51% in two years. SoMa was followed by three other submarkets in which rents grew more than 40% during that time: Redwood City, CA, up 45%; Midtown South in New York City, up 44%; and Mountain View in Silicon Valley, up 42%.

Other submarkets with rent growth of 20% or better in the past two years include River North in Chicago, Sorrento Mesa in San Diego, Santa Monica in Los Angeles and East Cambridge in the Boston area. The Northwest submarkets of Denver and Austin, as well as Lake Union in Seattle, each saw rents increase by 10% or more during the same time period.

“High-tech industry job growth accelerated over the past year and fanned out to cities across the US to tap into top tech-talent markets,” says Colin Yasukochi, director of research and analysis for CBRE Global Research and Consulting. “This intensification of growth and clustering in top-tech submarkets caused a sharp rise in office rents.”

As Yasukochi's observation and the rent growth numbers make clear, the benefits of the tech boom potentially extend well beyond the Bay Area and Manhattan's Silicon Alley. “Emerging and high potential markets represent opportunity for both occupiers and investors,” according to CBRE's “US Tech-Twenty” report. Atlanta, Chicago, Los Angeles and Baltimore all have moved significantly toward growth leadership over the past year, while their office markets are showing stronger performance.