Up from #8 in 2015, Austin ranked high for tech job growth momentum and educational attainment
Coming in at #5, up three spots from the 2015 scorecard, Austin was outranked only by the San Francisco Bay Area, Washington, D.C., Seattle and New York City. While these tech markets continue to lead the pack year after year, the latest CBRE report showed that competition for talent is getting tougher as more highly skilled tech workers are flocking to fast-growing tech markets—dubbed “momentum markets” in the CBRE report—where the cost of living is lower and tech jobs are plentiful, including Nashville, Charlotte, Tampa, Seattle and Phoenix.
Rankings for the Tech Talent Scorecard are determined based on 13 unique metrics including tech talent supply, growth, concentration, cost, completed tech degrees, industry outlook for job growth, and market outlook for both office and apartment rent cost growth. In the number 6-10 slots were Dallas/Ft. Worth, Boston, Raleigh-Durham, Atlanta and Baltimore. Rounding out the top 15 where Phoenix, Toronto, Chicago, Orange County and Minneapolis.
Influential Factors Shaping Tech Markets Today
The CBRE report highlighted several influential factors shaping both large and small tech markets today.
Educational Attainment/Tech Degrees: Nearly 70 percent of the top 50 tech talent markets have an educational attainment rate above the U.S. average (30 percent). Austin was the #7 market for educational attainment, at 47.6 percent.
Cost of Living: According to Moody’s Analytics, 36 of the top 50 tech talent markets have a cost of living above the U.S. national average. CBRE compared the average apartment rent to the average tech-worker wage in each market and found that even in the most expensive markets, tech wages are able to cover the high cost of living (using the affordability benchmark that allocates 30 percent of income to housing). Austin falls in the middle of the pack for apartment rent to tech wage ratio, at 15.7 percent. Of the top Texas markets, Dallas/Ft. Worth was only slightly more expensive than Austin at 16.1 percent, while Houston and San Antonio were more affordable at 13.7 and 13.8 percent, respectively.
Presence of millennials: The presence of higher education institutions helps markets attract high concentrations of millennials. Madison, Pittsburgh and Boston took the top spots, each boasting millennials as 25 percent or more of the total population. Six large tech markets increased their millennial population by more than 10 percent since 2009, with Washington, D.C. growing the fastest at 25.8 percent. Austin’s population of 20-something millennials grew by 12,800, or 7.5 percent, since 2009–representing 11 percent of Austin total growth in a population of 913,000. Austin’s population is made up of 20.2 percent millennials, compared to the U.S. average of 14.2 percent, making it one of the top 10 most concentrated millennial markets among the 50 markets examined in the report.
Impact on Office Markets
“Although a relatively small portion of the economy, tech-talent employers spurred economic activity and added more than 1 million tech jobs during the past five years,” said Colin Yasukochi, Director of Research & Analysis, CBRE. “As a result, tech talent growth has recently been the top driver of office leasing activity in the U.S. and high-tech companies are now one of the main drivers of commercial real estate activity.”
High-tech companies’ share of major leasing activity increased from 11 percent in 2011 to 18 percent in 2015 nationwide—the largest single share of any industry. Many tech-talent markets, especially those with high concentrations or clusters of tech companies, have seen rising rents and declining vacancies as a result. Significant demand for office space in top markets that have added tens of thousands of workers during the past five years raised rents to their highest levels and pushed down vacancy rates to their lowest.
“Austin is no longer solely a location for Bay Area companies to grow in a central time zone, but a holistic tech market with a healthy entrepreneurial spirit and startup scene. This was a critical jump to becoming a self-sustaining technology community, which will have lasting effects for Austin’s economy. From a real estate perspective, Austin’s biggest challenge is matching supply with demand. Rapid office space absorption by tech companies has contributed to Austin’s rising rental rates. The upward curve may settle some as construction projects in the Domain and downtown continue delivering and providing new alternatives to office users,” said Erin Morales, Senior Vice President, CBRE.
Office asking rents in Austin rose 30 percent to $32.65 per sq. ft. from Q1 2011 through Q1 2016, the third-greatest increase in the CBRE study behind the San Francisco Bay Area and New York City. The vacancy rate dropped 12.2 percentage points to 10.1 percent over the same period, the largest drop of the 50 markets in the CBRE study.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
