Pittsburgh Attracts Workers with Growing Tech Presence
Pittsburgh Attracts Workers with Growing Tech Presence
July 6, 2016
Report ranks Pittsburgh number 2 for most concentrated millennial market
Pittsburgh, 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. Pittsburgh ranks at number #29 on the overall tech talent list, and number two for the most concentrated millennial population, 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 leading to a rise in demand for office space and a decrease in office vacancy.
“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.
•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; however Pittsburgh is one of the fourteen that is below, with costs at 94 percent of the U.S. average. Pittsburgh had lower costs of living than all markets in the CBRE report except for Detroit, Rochester, Cleveland, Indianapolis, Columbus and Cincinnati. 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 Pittsburgh is $15,165 while the 2015 average annual tech wage was $77,045, resulting in an apartment rent to tech wage ratio of 19.7 percent.
•Presence of millennials: The presence of higher educational institutions helps markets attract high concentrations of millennials. Pittsburgh had the second-highest concentration of 20-something millennials as a percentage of the total urban population, at 24.9 percent as of 2014, behind only Madison, Wisconsin, and well above the national average of 14.2 percent. Pittsburgh also had the fourth-largest growth rate of 20-something millennials of the small markets* in the CBRE study, at 14 percent.
“Pittsburgh’s world-renowned universities are a huge driver of our dense millennial population,” said Jeffrey Ackerman, Managing Director of CBRE’s Pittsburgh business. “Carnegie Mellon University has one of the leading Robotics Institutes in the world and we are definitely reaping the benefits. A range of tech firms is expanding our traditional downtown core to the fringe markets, making these neighborhoods new and vibrant areas to work and live.”
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 2011-2016 are San Francisco Bay Area (+95 percent), New York (+46 percent), Austin (+30 percent), Boston (+27 percent) and Denver (+27 percent). Pittsburgh’s office asking rents increased 9 percent from Q1 2011 to Q1 2016.
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 (-8percentage points). Pittsburgh’s office vacancy rate, slightly increased from 11 percent to 11.3 percent from Q1 2011 to Q1 2016, with new construction and development easing tension on a tight market. Even with the slight increase, Pittsburgh was the 11th-tighest market of the 50 markets in the CBRE study.
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.
* The CBRE report defines small markets as those with a tech labor pool of fewer than 50,000.
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.