A surge in high tech employment is driving up office rents in tech-centric markets around the United States.
Tech sub-markets in San Francisco, Austin, New York and Silicon Valley have helped drive double-digit rent growth, according to research by the CBRE Group. In the SOMA region of San Francisco rents have increased 51 percent over the past two years; Redwood City in San Francisco Peninsula saw a jump of 45 percent; Midtown South in New York City was up 44 percent; and rents in Mountain View in Silicon Valley rose 42 percent.
"High-tech industry job growth accelerated over the past year and fanned out to cities across the U.S. to tap into top tech-talent markets," said Colin Yasukochi, director of research and analysis for CBRE global research and consulting. "This intensification of growth and clustering in top-tech submarkets caused a sharp rise in office rents."
In 20 tech-oriented office markets across the U.S., high-tech employment growth in the services sector has accounted for one of every four new office-using jobs since 2010, CBRE reports. In the 20 markets tracked by the firm, high-tech services jobs grew 15.2 percent between 2010 and 2012 compared with 9.3 percent collective growth from 2009 to 2011.
More from the report:
The rent premium commanded by submarkets with heavy high-tech employment is increasing. The differential between these submarkets and the Tech-Twenty office markets as a whole has grown to 18.1 percent, compared to 2.2 percent two years ago.
When deciding where to locate a high-tech oriented business or pick property investments, location is increasingly important. Clustering of tech oriented talent drives both demand for office space and underlying property performance.
Emerging and high potential markets represent opportunity for both occupiers and investors. Atlanta, Chicago, Los Angeles and Baltimore have moved significantly toward growth leadership and their office markets are showing stronger performance.