Cushman & Wakefield recently released Tech Cities 2.0 an annual report that identifies existing and emerging tech centers increasingly driving the North American economy and details their impact on the commercial real estate sector.
A follow-up from last year’s inaugural Tech Cities 1.0 report, this year’s research reviewed all major North American markets, and groups the top cities into three categories based on how important the tech sector is to the local economy and real estate market: ‘tech is a critical component’ / ‘tech is a key driver’ / ‘tech is important’.
Atlanta is included in the top 25 tech cities thanks to its world-renowned universities and low cost of living compared to other major MSAs. The influx of talent via migration couple with new graduates from top universities should ease the labor shortages that have held back job growth in office using industries.
To capitalize on the increase of tech companies in the city, Atlanta colleges and universities are beginning to tailor curriculums to align with the local industries experiencing the most growth. A few examples include The University System of Georgia’s FinTech Academy, which trains graduates for positions within the FinTech industry, and Georgia Tech’s Cybersecurity master’s degree program, which will include 250 students when it launches in January 2019. Additionally, WeWork recently opened its first Flatiron School in the city, which offers classes in Software Engineering, Data Science and Web Development.
“As tech companies continue to dominate headlines and grow, a key question is how this affects commercial real estate. Building upon our inaugural Tech Cities report from last year, Tech Cities 2.0 offers new data and a further in-depth analysis of the marketplace,” Revathi Greenwood, Cushman & Wakefield’s Americas Head of Research, said.
“Tech is no longer limited to just traditional technology companies – media companies, retailers and even law firms are competing for the same spaces and talent as traditional tech companies. While the result can be seen in nationwide trends, we’ve identified key insights that impact companies across every industry,” Greenwood said.
Ken McCarthy, Cushman & Wakefield’s New York-based Principal Economist and Applied Research Lead for the U.S. said Tech Cities 2.0 demonstrates the profound impact the tech sector has had on commercial real estate in what appears to be one fell swoop but has been building since the financial crisis of 2008.
“Although we expect established markets like Silicon Valley to see continued investment, new tech hubs are emerging across North America, from Provo to Philadelphia, sustaining a period of tech-driven, economic growth unseen since the dot-com boom of the late 1990s.”
Combining employment, occupations, venture capital investment, and demographics statistics, this year’s list from Tech Cities 2.0 is separated into three major categories:
- Tech is a critical component of the local economy and CRE market:
- Salt Lake City
- San Diego
- San Francisco
- Silicon Valley
- Washington, D.C. Metro
- Tech is a key driver of the local economy and CRE market:
- Dallas/Fort Worth
- Minneapolis/St. Paul
- Portland, OR
- Tech is important to the local economy and CRE market, but there are other important sectors as well:
- Greater Los Angeles
- South Florida
- New York City
Key findings from Tech Cities 2.0 include:
In the first of half of last year, 42% of the square footage in the top 100 leases in North America were signed by tech companies.
- The fastest growing tech employment market since 2010 is Provo, Utah. Though a smaller market than the others on the list, the number of people employed by tech companies increased 64.9%, surpassing the 62.7% increase in San Francisco.
- Average asking rents in cities like Atlanta, Austin, Seattle, and San Francisco have increased more than 50% since 2010.
- Property prices are skyrocketing. Among the Top 25, property prices have increased on average by 59%, with the greatest increases happening in Austin, Silicon Valley, and San Francisco.
- Cities that are targets for venture capital funding are the most important tech cities in North America. Among the Top 25, VC funding grew by an average of $2.0 billion compared to $457 million for the top 101 markets.
- The top four cities for new construction are all cities where tech is a critical factor in the local real estate market, including: Austin, Raleigh/Durham, Seattle, and San Francisco.