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  • Los Angeles Is Among Top-Producers Of Tech-Related Degrees But Area Needs To Boost Job Opportunities

Los Angeles Is Among Top-Producers Of Tech-Related Degrees But Area Needs To Boost Job Opportunities

July 6, 2016
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Lack of tech-related job opportunities puts LA on the list of “brain drain” markets, according to CBRE’s “Scoring Tech Talent” report

Los Angeles, July 6, 2016 – Los Angeles was ranked among the top producing metro areas for producing tech-related degree graduates, but a lack of jobs has placed the area among the top three "brain drain" markets with ample opportunity for growth, according to CBRE Group, Inc.’s annual Research Report, “Scoring Tech Talent,” which ranks 50 U.S. and Canadian markets according to their ability to attract and grow tech talent. 

Los Angeles was third, behind New York and Washington, D.C. and ahead of Chicago as the metro area producing the largest number of tech graduates, with 12,679 tech degrees in 2014, up 84.6 percent since 2010. Yet alumni do not always stay in the labor market where they earned their degrees and often migrate to locations that offer the best pay or have the most employment opportunities. 

“Tech companies need to give LA a closer a look because of the immense talent that does exist here,” said Executive Vice President Andrew Ratner, who leads CBRE’s office occupier business in Southern California. “LA has so much going for it. So many tech companies are opening offices in LA and are planning to expand here. The improving infrastructure and investments in public transportation, the climate, the culture. Downtown LA in particular will benefit hugely from this. A number of tech tenants have shown great interest in downtown and it’s just a matter of time until they plant their flags there, which will have a very positive impact on the entire area.” 

Tech Talent Scorecard 

Established tech markets, namely San Francisco Bay Area, Washington, D.C., and Seattle, once again dominated the top spots on the 2016 “Tech Talent Scorecard,” with New York and Austin rounding out the top five—a boost for Austin, which ranked #8 last year. LA’s lack of available jobs played a role in the metro area’s #22 ranking, after Philadelphia and ahead of Columbus, Ohio. 

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. 

The top 10-ranked cities on the Tech Talent Scorecard were all large markets, each with a tech labor pool of more than 50,000. In the number 6-10 slots were Dallas/Ft. Worth, Boston, Raleigh-Durham, Atlanta and Baltimore.  Rounding out the top 15 were Phoenix, Toronto, Chicago, Orange County and Minneapolis. 

“Tech talent markets share several distinct characteristics, including high concentrations of college-educated workers, major universities producing tech graduates and large millennial populations,” said Colin Yasukochi, who authored the report on behalf of CBRE Research. “The robust entrance of millennials into the labor pool contributed greatly to the growth in tech talent across all 50 downtown markets in our ranking this year.”

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), with Seattle and Washington, D.C. boasting more than 50 percent of residents age 25 years and older with Bachelor’s degrees or higher. More relevant to this study is the number of graduates who have earned technology degrees. Rounding out the top 10 were New York, Washington, D.C., Los Angeles, Chicago, Phoenix, Boston, the San Francisco Bay Area, Atlanta, Columbus and Detroit.

• 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). In Los Angeles, apartment asking rents have jumped 29 percent to an average $2,214, third highest after New York and SF Bay Area. 

• Presence of millennials: The presence of higher educational 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. During the same period, five of the smaller tech markets increased their millennial populations by more than 10 percent, with Salt Lake City and Richmond growing at significantly faster rates than the others.  In Los Angeles, the millennial population increased by 9.4 percent. 

“We have a number of submarkets that are really popular with tech companies and millennials,” said CBRE Executive Vice President Blake Mirkin. “Hollywood for example is able to provide the studio and stage space for the many tech companies that are morphing into larger media companies; in addition you have a great offering of residential and retail amenities, which is very attractive to the 20-something crowd.”

• Cost of doing business: The estimated one-year costs for a tech firm, including wage and rent obligations, placed Los Angeles in 10th place with an estimated $42.7 million. That compares with $56.4 million in San Francisco and $49.9 million in New York while Oklahoma City came in at $32.3 million and Vancouver at $29.2 million at the other end of the spectrum.

  
Impact on Office Markets

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. Office asking rents in Los Angeles have increased 24 percent over a five-year period while vacancies have slipped three percentage points to 14.8 percent.
 
“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 Mr. Yasukochi. “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.”

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. Rent growth is most prominent in the large tech markets with office rents in the San Francisco Bay Area nearly double what they were five years ago. But the decrease in vacancy rate is present across both large and small tech markets, with the Nashville vacancy rate the lowest of the top 50 tech talent markets. 

“What Los Angeles has going for it is the strong demand for content which we are the epicenter for; plus we have UCLA and USC which offer tremendous talent to fuel technology growth here,” said CBRE Senior Vice President, Richard Ratner. “At the same time, LA -- compared with the other cities mentioned in this report -- has a higher cost of doing business and a higher degree of regulation, which are dynamics affecting the number of tech job opportunities for graduates of these schools.” 

To view the full report, please click here.
 
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.​

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