Salt Lake City Moves From Emerging Market to Growth Leader In CBRE's Annual Tech Thirty Report

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.

 

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 (based on 2015 revenue).  The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at www.cbre.com.​

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