Tech Industry Drives Rent Growth in Top Office Markets

Tech Industry Drives Rent Growth in Top Office Markets

Job gains and increased venture capital funding in the technology industry are fueling rent gains in office markets across North America, according to a report by CBRE.

The Tech-30 report measures the industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada as well as select tech-heavy submarkets.

CBRE’s analysis found that over the past two years, more than two-thirds of the top-30 North American tech markets registered office-rent growth. Seven of those increased by double-digit percentages.

Top Tech-30 Markets For Office-Rent Gains

Market

Two-Year Rent Growth*

Market

Two-Year Rent Growth*

Vancouver

21.6%

Salt Lake City

12.3%

Boston

21.6%

Denver

10.3%

Austin, Texas

19.3%

Nashville

9.4%

Dallas/Fort Worth

18.8%

St. Louis

8.8%

Seattle

14.1%

Los Angeles

8.1%

*Q2 2022 vs. Q2 2020

Source: CBRE

Leading tech submarkets, often located near universities and characterized by scant vacancy and high-quality office space, tend to generate some of the strongest rent gains in their cities.

Top Tech-30 Submarkets For Office-Rent Gains

Submarket

Two-Year Rent Growth*

Submarket

Two-Year Rent Growth*

University City (Philadelphia)

18%

Far North Dallas

13%

CBD (Nashville)

16%

Northwest Austin

13%

Lake Union (Seattle)

14%

Northeast Charlotte

11%

Sorrento Mesa (San Diego)

14%

RTP/I-40 Corridor (Raleigh-Durham)

8%

Downtown (Denver)

13%

Tempe (Phoenix)

6%

*Q2 2022 vs. Q2 2020

CBRE

The report found that the most resilient markets positioned for renewed growth are Vancouver, Silicon Valley, San Diego, Boston and Raleigh-Durham, North Carolina.

The tech industry’s share of U.S. office-leasing activity slipped in the first half of the year, underscoring that the tech industry’s often-unmatched impact on the office market has receded a bit this year.

Meanwhile, U.S. tech job growth slowed to a 2.1% year-over-year gain in this year’s first half from a 4.5% pace in last year’s second half. Hiring momentum persists in many markets, including a dozen top U.S. and Canadian tech hubs that registered double-digit percentage gains in tech employment in 2020 and 2021, led by Vancouver, Toronto, Austin, Seattle, Montreal and Denver.

About 476,000 tech jobs have been created since February 2020, with two Canadian markets seeing the most growth. Vancouver, British Columbia, saw a 44% increase in high-tech jobs, while Toronto posted a 37% gain, according to CBRE’s report.

While U.S. leasing activity by the tech industry has stabilized, it remains 35% below pre-pandemic levels. Sublease space across Tech-30 markets is elevated at 3.8% of available space. Rents in 23 markets were higher in the second quarter than they were two years ago, but just six markets and eight submarkets recorded positive net absorption over the past two years.

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