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U.S. Tech-Twenty: Measuring Office Market Impact
The booming high-tech sector has been one of the major drivers in the U.S. office market recovery, with the industry responsible for one-fourth of all new office-using jobs created in the U.S. between 2009 and May 2014.
High-tech was also the top industry leasing office space in the U.S., accounting for 20% of major leasing activity thus far in 2014, up from 14% in 2013.
San Francisco topped the U.S. Tech-Twenty Office Markets list for the third straight year. Over the past two years, San Francisco’s high-tech job base has grown by 51%, while average asking rents have climbed 35%.
Between 2011 and 2013, 10 Tech-Twenty markets grew their high-tech job base by more than 10%, including Austin (34%), San Francisco Peninsula (30%) and New York (23%).
Eight of the Tech-Twenty markets posted double-digit rent growth over the past two years, led by the Bay Area markets—San Francisco (35%), Silicon Valley (21%) and San Francisco Peninsula (19%)—Manhattan (17%) and San Diego (15%).
The top high-tech submarkets for office rent growth over the past two years were Redwood City in San Francisco Peninsula (30%), Midtown South in Manhattan (29%) and River North in Chicago (26%).
Because of the strength of these high-tech submarkets, the average office rent aggregate of the Tech-Twenty submarkets was 18% higher than the Tech-Twenty overall markets.
From an investor’s perspective, San Diego, Portland, and Orange County offer the greatest potential. These markets are also attractive to occupiers, although Raleigh-Durham offers the best combination of low office rents and a growing high-tech labor pool.
At the heart of high-tech’s growth is strong demand for products and services from consumers. As long as high-tech companies align themselves with this demand, the unrealistic growth and valuation expectations that defined the dot-com bubble should be avoided.
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Last Modified: Thursday, August 14, 2014
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