By Ken McCarthy, Principal Economist, Applied Research Lead; and Robert Sammons, Regional Director, Northwest U.S. Research
What better way to launch our new Tech Cities series than with a ranked list? A data-driven snapshot that provides order while simultaneously promising that change is coming. Nothing stays #1 forever, and during the journey we can cheer and jeer the results.
Cushman & Wakefield admittedly took advantage of the collective enjoyment of lists to lay the groundwork for our series – what we studied and how we got there – and will move forward to explore where, when, and why it is important to you.
Tech Cities 1.0 looked at the top 25 tech markets across the U.S. as ranked by a combination of metrics, including venture capital/funding, institutes of higher learning, knowledge workers, tech workers, educational attainment, and growth entrepreneurship.
Our research team quickly followed the report with top 10 tech cities snapshots that take a deeper dive into the 10 hottest tech markets to watch, highlighting top tenants and their percentage of tech absorption; projects under construction, key investment sales; and key market indicators.
One of the more noticeable results is that the sheer size of a city does not correlate to a high ranking on the list.
We think the reason for this is that the index focuses on the impact of the tech sector to the real estate sector of a given city. In large cities, the tech sector may be considerable in absolute numbers but not be the largest industry in the city. Take New York City as an example. Tech – or more inclusively Technology, Advertising, Media, and Information (TAMI) – has been very strong and an important player, particularly in the current expansion. However, in absolute terms there are 100,000 more people employed in financial services than there are in TAMI.
Since our goal was to determine the impact of tech on the local real estate market, we used metrics that focused on the concentration of jobs, or occupations, rather than the absolute number of jobs, etc. This focus on concentration had the effect of elevating some cities that are relatively small – such as Madison, Wisconsin – but where the impact of tech on the local economy is on a par with major tech hubs.
As we expand this research, we will also look into cities that have large populations where Tech is large in an absolute sense.
Another factor influencing the data we measured for the report is the ubiquity of tech and that many long-established industries are being expanded, even redefined, by technology beyond their operations or at the back-end. Change is occurring quickly with FinTech, LegalTech, EdTech, and myriad other start-ups affecting not just how business functions but how and where their employees work. Add to that the fact that ongoing developments in artificial intelligence, virtual reality, and other undiscovered advances will continue to evolve our workplaces and workforces.
Our ongoing Tech Cities research series will continue to explore and address the influential trends impacting the commercial real estate industry and beyond. Our goal is to keep a watchful eye on the interconnection between the tech industry and cities across the country, particularly in relation to commercial real estate.
Various reports to come include further detail via video on the top cities within this report as well as specific results from our U.S. Tech Survey sent to all of our markets, including commentary from market-leading experts. We will not only look at absolute size as we explore cities across the U.S. and the impact of technology, but also add new metrics as we dive deeper into what makes the tech sector click in markets across the U.S.
As we note in the report, tech is ever changing. It has many facets, and so will our continuing analysis of this vital and dynamic sector.
Robert Sammons is a Research Director for Cushman & Wakefield. Based in San Francisco, Robert’s principal roles include working closely with the C&W research teams across the Northwest – including Northern California, Portland and Denver. Robert has 29 years of real estate experience as both an appraiser and researcher. He earned a BBA in Real Estate from The University of Georgia and an MS in Real Estate from Georgia State University. Robert is a member of the Urban Land Institute.
Ken has been with Cushman & Wakefield since August 2006. As Principal Economist, he works with the Chief Economist on Cushman & Wakefield’s U.S. economic position and presents it to the public. As Applied Research Lead, Ken is responsible for preparing cutting edge research about the outlook for commercial real estate in the Americas.