Tech Growth Covers Broad Swath in Office

LOS ANGELES—The usual suspects on the West Coast may lead the way when it comes to high-tech employment growth and, accordingly, office rent growth, yet CBRE's 2015 Tech-Thirty report shows that the sector's gains cover a broad swath geographically. Just four of the top 10 markets for tech job growth—covering software and services—are on the West Coast; unsurprisingly, the leader is San Francisco, which also tops the list for rent growth.

That being said, San Francisco's tech job growth rate over the most recent two-year period, 2012 to 2014, was actually lower than it was during the prior period (2011 to 2013). In fact, at 42.7% over the past two years it was matched by Phoenix, although the California city had a larger number of tech jobs added between '12 and '14 (16,976 compared to 12,662) as well as a higher share of tech jobs as a percentage of all new office-using jobs (55.1% compared to 31.3%).

Among the 30 leading technology markets in the US and Canada, 24 exceeded the national average of 5.7% for software/services job creation between '12 and '14. In addition to San Francisco and Phoenix, they included Austin (33%), Silicon Valley (27%), Nashville (22.7%), New York City (22.6%), Seattle (18.3%), Indianapolis (18%), Charlotte (17.3%), Salt Lake City, (16.2%), Portland (16.1%), the San Francisco Peninsula (15%), Chicago (14.9%), Raleigh-Durham (14.2%), Pittsburgh (14.1%), Orange County (12.9%), Dallas/Fort Worth, Minneapolis and Denver (10.7% each), Boston and St. Louis (8.5%), Atlanta (7.8%), San Diego (7.6%) and Los Angeles (6.7%).

Of the top 30, 11 markets posted faster job growth between '12 and '14 than between '11 and '13, with Silicon Valley, Pittsburgh and Minneapolis among them. Among the 19 that didn't grow faster during the most recent period, only Washington, DC lost tech jobs, due mainly to the lingering effects of federal government cutbacks.

It stands to reason that fast growth in tech employment also spurred rent growth. Sixteen of CBRE's Tech-Thirty posted rent growth of 10% or more between the second quarter of '13 Q2 of this year.  Three of the top five markets for rent growth were in the Bay Area, and those three markets—San Francisco, Silicon Valley and the San Francisco Peninsula—were also among the top six most concentrated markets in terms of new high-tech jobs as a share of new office jobs. This points to “the importance of the high-tech industry as an economic and office-market driver over the past few years,” according to the CBRE report.