The office sector continues to perform well in urban markets overall, but it’s specifically hot in cities where technology is fueling job growth. In those markets, demand is high, new developments are springing up, and rents are soaring.
While Silicon Valley still reigns supreme in terms of tech innovation and jobs, major firms and startups alike are turning their eyes to other metro areas that can supply the qualified workforce they need.
Home to technology giants like Microsoft, Google, and Amazon, Seattle is a favorite location for tech companies and startups. A whole group of successful and growing tech companies have made a start here in the last 10 years, including Expedia, Zillow, Tableau, and Zulily.
Even more tech firms have established engineering offices in Seattle, drawing waves of highly trained workers to the city. Just some of the firms with engineering locations there include Facebook, Apple, Twitter, Uber, Ebay, and Hulu.
A result of this influx has been a rapid rise in rents, particularly in downtown Seattle. This has caused existing tenants to be squeezed out by companies willing to pay rents as much as 200% higher than a decade ago. The rates rose by over 7% in both of the last 2 years, and this rise has been greater than in any other metro area in the U.S. The average rent for office space stands at nearly $28/sqft. Downtown Seattle is a landlord’s market, catering to large firms willing to sign long-term leases and wait for a spot.
Average office rents in the Texas capital increased by 6% last year, fueled by the city’s booming tech industry. Current lease rates are around $21/sqft., on average. Rates continue to rise despite a slight dip in occupancy, attributable to the launch of some major new developments in the metro area.
Austin is the 3rd-fastest growing city in the country. A major draw is the presence of influential tech firms including Dell, IBM, Oracle, and hundreds of smaller tech companies that employ roughly 86,000 workers. Some of the most rapidly growing firms in the area include the self-storage listing service Sparefoot, utilized by over 9500 facilities, WordPress hosting service WP Engine, and Ed Tech firms Civitas Learning.
This southern capital and transportation hub added around 140,000 jobs in 2015, putting it at #2 in the nation for job growth. The city’s major universities and the Centers for Disease Control support well-paid jobs in medicine and technology. The city has a broad-based economy and a low cost of doing business for a larger metro area.
Office rents have seen an increase in Atlanta of more than 5% over the last year, and rates average over $20/sqft. in the city. As buildings continue to add amenities and other draws, much of the city’s technology sector supports large healthcare companies and facilities like the Centers for Disease Control.
Cities like San Francisco, New York, Boston, and Washington continue to house a large portion of the country’s tech firms. However, the rate of growth in office rents is most striking among these secondary markets that are generating a relatively high number of new jobs in the technology sector.