Yahoo Finance Office rental crisis? Not in these hot tech markets
After aggressively reducing its appetite for new office space during the pandemic, the tech industry has caught up to 2019 leasing activity levels, according to a soon-to-be released CBRE report that was shared exclusively with USA TODAY.
Tech companies are now leasing 22% of U.S. office space, after scaling back to 17% in 2020. And two-thirds of tech markets are experiencing rental gains over 2019.
The industry experienced pandemic-related business growth in areas like e-commerce, streaming and cloud services, search and social media. It added 219,000 jobs by June 2021.
Total high-tech employment reached 3.9 million that month, 3.3% above its pre-pandemic high, fueled by demand for tech products and service. It is surpassed only by the life sciences industry.
The growth is adding to a rebound in U.S. office-leasing activity in 2021, according to the report.
Three markets achieved double-digit office rent gains over 2019 rates. Seattle topped the list with a 15% increase over 2019 rental rates.
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While many tech companies are embracing hybrid-work formats to provide their employees flexibility, the increased leasing activity demonstrates the industry "also values the collaborative environment of the physical office and its role in bringing employees together to foster innovation," says Colin Yasukochi, executive director of CBRE’s Tech Insights Center.
Here are the top 10 tech markets that surpassed 2019 rental rates:
(CBRE’s Yasukochi explains why)
Seattle
Increase since 2019: 15%.
Why: Acceleration of e-commerce use and work productivity software tools have created new demand for office space in the region, especially in the Bellevue, Washington, area.
Charlotte, North Carolina
Increase since 2019: 11.2%.
Why: Expansion of fin-tech firms and financial services sector from higher-cost locations.
Austin, Texas
Increase since 2019: 11%.
Why: Tech firms continue to grow and relocate from out of state to be closer to the high-tech manufacturing supply chain, established tech workforce and supply of new graduates.
Denver
Increase since 2019: 9%.
Why: The young, educated workforce that enjoys Denver’s work-life balance and quality of life continues to attract other tech employers.
Phoenix
Increase over 2019: 8.3%.
Why: Tech firms relocating to the market seek highly sought-after areas that are close to tech talent.
Los Angeles
Increase over 2019: 7.4%.
Why: Tech continues to go “Hollywood” with streaming content. And there's demand for tech talent adjacent to the media and entertainment industries, and that is driving demand for office and studio space.
St. Louis
Increase over 2019: 6.2%.
Why: With a foundation in aerospace and science, many tech startups and more mature tech firms are attracted to the talent and low business and real estate costs.
Nashville, Tennessee
Increase over 2019: 6%.
Why: The Music City’s lifestyle and creative ecosystem continue to attract tech firms with longer-term expansion plans.
Raleigh-Durham, North Carolina
Increase over 2019: 6%.
Why: Tech and life sciences thrive in this innovative and academic environment.
Salt Lake City
Increase over 2019: 6%.
Why: The highly educated and innovative workforce has produced many tech startups and entrepreneurs. Existing tech firms are growing, and new ones are moving in or being created, increasing demand for talent and office space.
Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal
This article originally appeared on USA TODAY: Office space rental rates for tech hubs rebound from pandemic
