Report ranks Philadelphia #21 of 50 markets on “Tech Talent Scorecard”
Philadelphia, PA—July 6, 2016 – San Francisco remains the nation’s leading tech market, but the competition for talent is getting tougher as more highly skilled tech workers—especially millennials—are flocking to cities where the cost of living is lower and tech jobs are plentiful, 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. Philadelphia ranks at number #21 on the overall tech talent list, and number five for millennial population growth, a characteristic shared by strong tech talent markets across the country.In their quest for highly skilled talent and for lower cost of doing business, both new and expanding companies are establishing footprints in these more affordable markets—including Philadelphia—leading to a rise in demand for office space and a decrease in office vacancy.
“Philadelphia has continued its steady growth in creating tech jobs and bolstering the fundamentals necessary to fostering a successful tech ecosystem. While Philly is still producing more tech degrees than jobs, we will see a shift in the upcoming years with the expanding medtech companies. That and the continued urbanization of historically suburban users,” said Rija Beares, who leads the Tech and Media Practice in Philadelphia for CBRE.
“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.”
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. 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.
Influential Factors Shaping Tech Markets Today
The CBRE report highlighted several influential factors shaping both large and small tech markets today.
• 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, including Philadelphia. 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). The annualized apartment rent in Philadelphia is $15,760 while the 2015 average annual tech wage was $88,789, resulting in a rent to tech wage ratio of 17.8 percent.
• 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, including Philadelphia, whose millennial population grew by 28,700 or 11 percent. That’s 121 percent greater than total growth in a population of nearly 1.6 million.
• Gender Diversity: Philadelphia is the 10th most gender-diverse tech talent market on the list, with women occupying 28.4 percent of tech positions in the market.
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 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.”
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. 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.
Of the 50 tech markets analyzed in the CBRE report, those experiencing the largest rent cost increases from Q1 2011 to Q1 2016 are San Francisco Bay Area (+95 percent), New York (+46 percent), Austin (+30 percent), Boston (+27 percent) and Denver (+27 percent). Philadelphia’s rent cost increased 6 percent to $26.27.
Tech markets experiencing the largest office vacancy rate decreases during the same time period were Austin (-12.2 percentage points), Toronto (-12.1 percentage points), Vancouver (-10.1 percentage points), Tampa (-9.2 percentage points) and Charlotte (-8 percentage points). Philadelphia’s office vacancy rate decreased-3.3 percentage points to 15.1 percent.
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.
