The South Valley Submarket Leads the Local Market In Tech Growth
Salt Lake City—November 30, 2016—Salt Lake City transitioned from an “emerging market” to a “growth leader,” meaning it saw above-average high-tech software/services job growth and above-average office market performance, according to CBRE’s annual Tech-Thirty report, which analyzes the 30 leading technology markets in the U.S. and Canada in terms of high-tech software/services job growth. Salt Lake achieved the seventh-highest net absorption growth (5.8 percent) in the report, reflecting the impact that tech is having on the local commercial real estate market.
“Tech has been a driving force in Salt Lake’s economy for some time now, as evidenced in the market’s transition from an emerging market to a growth leader,” commented Eric Smith, a senior vice president in CBRE’s Salt Lake office. “Of particular note is the fact that the area with the greatest concentration of tech firms—the South Valley submarket—had 1.3 million sq. ft. of office space under construction at mid-year 2016. Though not all of this will be filled by tech users, there is a direct link to the high construction levels and the number of technology firms near the Point of the Mountain. In fact, the South Valley ranks fourth in the report for net absorption, meaning much more real estate was leased or occupied than vacated. These are strong numbers and they bode well for the local economy.”
Tech-related office leasing accounted for 20 percent of all office leasing in the U.S. in the first half of 2016, up from 18 percent in 2015, despite an overall slowing in tech job creation. In Salt Lake, 37 percent of top leases through mid-year 2016 were driven by tech firms.
Office Rents in the Tech-Thirty
The CBRE report shows that office rents for the top
submarket in each of the 30 markets analyzed increased in all but one submarket
between Q2 2014 and Q2 2016. The highest rent growth in this period occurred in
both established and up-and-coming tech submarkets, illustrating stiff
competition among tenants to locate in areas rich in talent, such as University
City, Oakland/East End Pittsburgh, East Cambridge, Palo Alto and Tempe. Average
office rents in Salt Lake’s top tech market, the South Valley, average $23.73
per square foot, full service, compared to $22.52 for the overall Salt Lake market
during the same time period. However, the South Valley’s achieved rent growth of
nearly 8 percent was lower than the overall Salt Lake market, which reached
12.4 percent over the past two years.
Job Growth in the Tech-Thirty
CBRE also analyzed the Tech-Thirty markets according to high-tech
industry job growth. San Francisco topped the rankings for the fifth
consecutive year; its high-tech job base has grown 47.0 percent between 2013
and 2015, while average asking rents increased by 22.7 percent
from Q2 2014 and Q2 2016. Eighteen markets outperformed the U.S. average of
13.7 percent job growth in high-tech software/services, with Phoenix (44.5
percent), Austin (33.3 percent), Charlotte (33.2 percent), and Indianapolis (27.9
percent) rounding out the top five. Salt Lake City experienced high-tech job
growth of 14.1 percent during this same time period.
Over the past five years, the software/services industry created 780,000 new jobs at a 7.3 percent growth rate and accounted for nearly 20 percent of major leasing activity. In H1 2016, tighter labor and volatile capital market conditions led to job creation slowing to a 4 percent annual growth rate, which had a slight impact on certain office markets, like Washington, D.C., New York and the San Francisco Bay Area.
“Advanced technology has integrated itself into business productivity and although the talent pool is limited, strong demand for technology services from both businesses and consumers is expected to support hiring by high-tech firms. The skills of the available labor pool do not appear to align with available jobs, causing a structural barrier to growth,” said Colin Yasukochi, director of research and analysis, CBRE. “This demand for technology should support growth among high-tech companies and high-tech office market clusters.”
High-Tech Software/Services Job Growth
|
Office Market Rent Growth
|
||||
Rank
|
Market
|
2013-2015
|
Rank
|
Market
|
Q2 '14 vs. Q2 '16
|
1
|
San Francisco
|
47.0%
|
1
|
Silicon Valley
|
28.4%
|
2
|
Phoenix
|
44.5%
|
2
|
Raleigh-Durham
|
24.6%
|
3
|
Austin
|
33.3%
|
3
|
Orange County
|
24.3%
|
4
|
Charlotte
|
33.2%
|
4
|
San Francisco
|
22.7%
|
5
|
Indianapolis
|
27.9%
|
5
|
SF Peninsula
|
19.8%
|
6
|
Silicon Valley
|
26.1%
|
6
|
Nashville
|
18.1%
|
7
|
Toronto
|
25.9%
|
7
|
Dallas/Ft. Worth
|
16.6%
|
8
|
New York
|
25.9%
|
8
|
Austin
|
15.3%
|
9
|
Chicago
|
21.1%
|
9
|
Charlotte
|
14.8%
|
10
|
Dallas/Ft. Worth
|
19.7%
|
10
|
Portland
|
14.2%
|
11
|
Pittsburgh
|
18.8%
|
11
|
San Diego
|
13.6%
|
12
|
Seattle
|
17.6%
|
12
|
Boston
|
12.7%
|
13
|
Detroit
|
17.1%
|
13
|
SALT LAKE CITY
|
12.4%
|
14
|
Vancouver
|
16.8%
|
14
|
Denver
|
12.0%
|
15
|
Raleigh-Durham
|
16.3%
|
15
|
New York
|
11.6%
|
16
|
Nashville
|
16.2%
|
16
|
Phoenix
|
11.6%
|
17
|
San Francisco Peninsula
|
15.1%
|
17
|
Atlanta
|
11.4%
|
18
|
SALT LAKE CITY
|
14.1%
|
18
|
Los Angeles
|
10.1%
|
19
|
Orange county
|
13.3%
|
19
|
Minneapolis
|
10.0%
|
20
|
Los Angeles
|
13.0%
|
20
|
Vancouver
|
9.0%
|
21
|
Atlanta
|
12.6%
|
21
|
Pittsburgh
|
7.3%
|
22
|
Boston
|
12.2%
|
22
|
Chicago
|
5.7%
|
23
|
Portland
|
12.1%
|
23
|
Seattle
|
5.2%
|
24
|
Denver
|
10.1%
|
24
|
Indianapolis
|
5.0%
|
25
|
Minneapolis
|
8.1%
|
25
|
Philadelphia
|
4.4%
|
26
|
San Diego
|
8.0%
|
26
|
Detroit
|
3.5%
|
27
|
Baltimore
|
4.5%
|
27
|
St. Louis
|
-0.3%
|
28
|
Washington, D.C.
|
3.9%
|
28
|
Baltimore
|
-0.5%
|
29
|
St. Louis
|
2.3%
|
29
|
Toronto
|
-1.2%
|
30
|
Philadelphia
|
2.3%
|
30
|
Washington, D.C.
|
-3.7%
|
Source: U.S. Bureau of Labor Statistics, July 2016, Statistics Canada, August 2016, CBRE Research, Q2 2016.
|
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