LOS ANGELES--(BUSINESS WIRE)--Nov. 16, 2017--
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,
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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Source: CBRE Group, Inc.
CBRE Group, Inc.
Corey Mirman, 212.984.6542