Dwindling Availability in the Hottest Tech Submarkets Causing Tech Firms to Expand into Downtowns and Tech-Adjacent Submarkets
November 16 2017 - 8:00AM
Business Wire
The willingness of tech companies to pay a premium for office
space in the hottest tech submarkets is spilling over into
neighboring submarkets as available space dwindles, according to
CBRE’s annual Tech-30 report, which measures the tech industry’s
impact on office rents in the 30 leading tech markets in the U.S.
and Canada.
As a result, adjacent submarkets and traditional downtowns with
skylines—rather than the brick-and-beam buildings that tech
companies have preferred—are primed to benefit, creating
opportunity for commercial real estate investors.
“Office rents have increased in every primary tech submarket
over the past two years, illustrating stiff competition among
tenants to locate in talent-rich areas such as Tempe, East
Cambridge, Minneapolis’s North Loop and South Orange County, all of
which have very low office vacancy,” said Colin Yasukochi, director
of research and analysis for CBRE and the report’s author. “If tech
companies that are used to paying a premium for space in the top
tech submarkets are forced to move to adjacent submarkets to
expand, we could start to see significant rent growth in those more
traditional markets as well.”
The research found that the top tech submarkets with the lowest
vacancy rates are East Cambridge (3.3 percent), Palo Alto (3.7
percent) and Mount Pleasant/False Creek in Vancouver (4 percent) as
of Q2 2017. The office rent premium paid by tenants in these
markets continues to widen, with average rents for top tech
submarkets increasing faster than their broader markets, with an
average premium of 16.2 percent.
The CBRE report also sorted markets according to both job growth
and rent growth over the past two years.
- Top Job Growth Markets — For the
sixth consecutive year, San Francisco was the top Tech-30 market
for high-tech job growth; its high-tech job base grew by 39.4
percent over the past two years, while its average asking rent
increased by only 7.1 percent. Charlotte (31.6 percent), Pittsburgh
(31.4 percent) and Indianapolis (27.8 percent)—all low-cost
markets—had the next highest job growth rates and rent increases of
16.9 percent, 3.5 percent and 6.5 percent, respectively.
- Top Rent Growth Markets —
Double-digit office rent growth was achieved in 13 markets over the
past two years, led by Orange County (23.3 percent), Nashville
(21.2 percent), Atlanta (17.6 percent) Charlotte (16.9 percent) and
Silicon Valley (16.8 percent).
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500
company headquartered in Los Angeles, is the world’s largest
commercial real estate services and investment firm (based on 2016
revenue). The company has more than 75,000 employees (excluding
affiliates), and serves real estate investors and occupiers through
approximately 450 offices (excluding affiliates) worldwide. CBRE
offers a broad range of integrated services, including facilities,
transaction and project management; property management; investment
management; appraisal and valuation; property leasing; strategic
consulting; property sales; mortgage services and development
services. Please visit our website at www.cbre.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20171116005125/en/
CBRE Group, Inc.Corey Mirman,
212.984.6542corey.mirman@cbre.comorAaron Richardson,
212.984.7126aaron.richardson@cbre.com
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