Tech industry accounts for one-fifth of US office leasing

San Francisco, United States

The US tech industry continues to be a major driver of the country’s commercial property market, accounting for almost 20 per cent of office leasing.

Over the past five years, the industry has been the fastest growing subset of the labor market, creating 780,000 new jobs at a 7.3 per cent growth rate.

San Francisco is ranked the top tech city for the fifth year in a row, according to CBRE’s new Tech Thirty report. The city’s high-tech sector drives its office market, accounting for 54 per cent of all leasing activity. The average asking rent is $73 per square foot, with a vacancy rate of 6.3 per cent – far below the 18.1 per cent recorded by second place city Phoenix (an average rent of $24 per square foot) and third place Austin’s 10 4. per cent ($33 per square foot).

Toronto is the tech market with the most momentum, with tech companies more than doubling their footprint in the city’s Downtown area, pre-leasing a substantial amount of new construction through 2019.

However, the market is about to undergo a shift for both occupiers and investors, as the tech job growth rate slowed to 4 per cent this year, notes CBRE.

The hottest submarkets, where tech job is still booming, is led by East Cambridge, Palo Alto and Santa Monica, with the resulting low vacancy and higher costs driving tech companies to turn to new clusters to match demand. Boston and New York are two markets that have seen a shift in dynamics.

“Although tech is very much at the center of the East Cambridge submarket, we have seen some demand in Boston shift to the Seaport and the CBD which have larger available blocks and more adaptive space”, Spencer Levy, head of Americas Research at CBRE, tells World Property Journal. “Similarly, in New York, Brooklyn, Downtown and Midtown have attracted tech companies as Midtown South pricing has increased and space options have diminished.”