September 30, 2013

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Report: High Tech Employment Growth Leads to High Rent Growth

Press Release

September 30, 2013

Salt Lake City — Rising high-tech employment has helped fuel double-digit rent growth in 10 U.S. tech-dominated submarkets, according to the latest research from CBRE Group, Inc. These submarkets, located within major tech-oriented cities, including San Francisco, Austin, New York City and Silicon Valley, posted rent growth of at least 10 percent over the past two years, contributing to the gradual recovery of the U.S. office market.

The relationship between high-tech job growth and accelerating rents was especially pronounced in SOMA in San Francisco, where rents have increased 51 percent over the past two years, Redwood City in San Francisco Peninsula (up 45 percent), Midtown South in New York City (up 44 percent) and Mountain View in Silicon Valley (up 42 percent).

“High-tech industry job growth accelerated over the past year and fanned out to cities across the U.S. to tap into top tech-talent markets,” said Colin Yasukochi, director of research and analysis for CBRE Global Research and Consulting. “This intensification of growth and clustering in top-tech submarkets caused a sharp rise in office rents.”

Within the local market, Salt Lake City was highlighted as one of seven growth leaders in the Tech-Twenty Market Power Diagram. This data provides insight into how influential the high-tech industry has been on office markets, and highlights potential opportunity for occupiers and investors. (Noted on page 5 of the report)

“Having a strong, local tech sector positively impacts our market as a whole,” said Mark Bouchard, senior managing director of CBRE Salt Lake City. “The influence of Salt Lake’s tech industry is being categorized among dominant markets such as Silicon Valley and Seattle. We have a strong, emerging tech market that is receiving national recognition; this is something that we should be proud of and put forth the effort to capitalize on.”

According to the report, “U.S. Tech-Twenty: Measuring Office Market Impact,” which tracks high-tech employment and office market conditions in 20 tech-oriented office markets across the U.S., high-tech employment growth in the services sector has accounted for one of every four new office-using jobs since 2010. Collectively, high-tech services jobs in all Tech-Twenty markets grew 15.2 percent between 2010 and 2012 compared with 9.3 percent collective growth in the prior two-year period (2009 to 2011). Sixteen markets saw accelerated job growth during this same comparison period, led by San Francisco, Austin, Chicago, and Los Angeles.

Other highlights of the report include:

  • The rent premium commanded by submarkets with heavy high-tech employment is increasing. The differential between these submarkets and the Tech-Twenty office markets as a whole has grown to18.1 percent, compared to 2.2 percent two years ago.
  • When deciding where to locate a high-tech oriented business or pick property investments, location is increasingly important. Clustering of tech oriented talent drives both demand for office space and underlying property performance.
  • Emerging and high potential markets represent opportunity for both occupiers and investors. Atlanta, Chicago, Los Angeles and Baltimore have moved significantly toward growth leadership and their office markets are showing stronger performance.

To view the full report click">here.


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