CHICAGO—Silicon Valley may have been the epicenter of the US high tech industry, but according to JLL’s latest US Technology Office Outlook, many firms in the sector are branching out. “For high-tech companies, what is most critical is an available labor force and access to talent,” Steffen Kammerer, leader of JLL’s technology practice group, tells And since new college graduates go where they can afford to live, it is the more affordable metro areas which will provide the best access. “I think we are going to see new tech hubs.” 

But affordability is only one consideration. Tech-oriented millennials tend to congregate in cities that offer a work-life balance and growing amenity bases, especially if that includes a lot of outdoor activities. Austin, TX scores high on this metric, and the performance of its tech sector over the past year illustrates it. JLL termed it “a prime low-cost alternative, ” but also noted that with its average asking rents at $32.59 per square foot, the tech hub now ranks 10th highest among the 37 markets analyzed in the report. Northern California streets like Sand Hill Rd. and Hamilton Ave.—which at $141.60 and $124.44 per square foot respectively—were the most expensive in the US. Still, “Austin’s 15% annual job growth, second only to San Francisco, will keep talent attraction strong.” 

Major tech firms also look to these secondary and tertiary markets to accommodate anticipated growth because many now believe “adjacency in business units may not be critical,” Kammerer says. He expects these “900-pound gorillas” to keep growing in Northern California, but instead of having everybody under one roof, certain business units can now relocate to cheaper locales without the companies losing any efficiency.

There is also pressure on the small- to mid-sized companies to find cheaper spaces, according to the new report. In the Silicon Valley, “big name tech companies like Google and LinkedIn have been aggressively leasing large blocks of space, pushing tenants south along the 101 corridor. New construction is pre-leasing quickly and offering little relief to strong demand.” 

In the past year, 34 tech companies launched new locations across 19 markets and occupied more than 2.1 million square feet of office space.

But companies looking for cheaper space don’t have to move to new cities. Instead, developers across the country have begun taking over run-down industrial buildings in underutilized submarkets and transforming them into high tech office space.

About four years ago, for example, a joint venture between Worthe Real Estate Group and Shorenstein Properties paid $44 million for a former postal distribution building at 13031 W. Jefferson Blvd. in the Los Angeles neighborhood now known as “Silicon Beach.” The partners took advantage of the 25′ high bay ceiling heights by installing floor-to-ceiling glass walls and flooding the interior with natural light. They also cut a 50×200 open space into the building, now called “The Reserve,” and added a 60,000 square foot park with Wifi and volleyball courts, further connecting its occupants to the outdoors. 

These types of projects are happening all over the country, Kammerer says. Many of these buildings now “have bocce courts in the back where once there were only loading docks.” 

How long will this expansion last? That is not easy to say, he says, partly because so many firms want to expand their high tech capacity that the sector may have a lot of hidden strength. “We had a recent conversation with our head of research and what was conveyed is that we still have a healthy run ahead.”