Technology companies based in the top four tech headquarters markets—the San Francisco Bay Area, Seattle, Boston and New York—are expanding into new markets, creating more demand for office space and driving office rent growth in the beneficiary markets, according to CBRE’s annual Tech-30 report, which measures the tech industry’s impact on office rents in the 30 leading tech markets (based on job growth) in the U.S. and Canada.
Together, tech firms headquartered in these four markets have taken more than 25 million sq. ft. of space outside of their headquarters markets over the past five years, led by firms in the San Francisco Bay Area, which accounted for 18 of the 25 million sq. ft.
Nine of the top 10 beneficiary markets (listed below, excluding other top tech headquarters markets) saw rent growth that exceeded the U.S. average of 5.6 percent over the past two years. Eight ranked in the top half of the Tech-30 markets in terms of rent growth.
The top four tech headquarters markets are also feeding each other, with cross-market expansion between the San Francisco Bay Area, Seattle, Boston and New York accounting for approximately 14 million of the 25 million sq. ft. of migration.
The Seattle office market has been the greatest beneficiary of this migration, with San Francisco Bay Area firms taking 3.5 million sq. ft. there over the past five years. This correlates with the growth of Seattle’s high-tech job base, which is up 26 percent over the past two years, surpassing San Francisco in high-tech job growth for the first time in seven years. Accordingly, Seattle’s office rents are up 14 percent over the same two-year period (fourth most among the Tech-30), and net absorption is up 5.2 percent (eighth most among the Tech-30).
“San Francisco Bay Area out-migration has been driven by tech firms’ outsized growth and a combination of scarce office space and a tightening labor market, which has necessitated a more distributed workforce” said Colin Yasukochi, director of research and analysis for CBRE in the San Francisco Bay Area. “By expanding into other markets, these tech firms can tap into new and potentially lucrative business opportunities clustered in other markets, such as media and entertainment in Los Angeles or machine learning and cyber security in Washington, D.C.”
“We expect large tech companies to continue to expand outside their headquarters markets—including further into secondary and even tertiary markets—particularly as space availability in top tech submarkets continues to tighten, driving rents up. Large tech company expansion into smaller markets will help foster innovation clusters, further boosting job creation and creating additional office demand,” Mr. Yasukochi added.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), 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 2017 revenue). The company has more than 80,000 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.
