While established markets like Silicon Valley are seeing continued investment, new tech hubs are emerging across North America
The top four US cities for new construction are all those where technology is a critical factor in the local real estate market, according to real estate services firm, Cushman & Wakefield’s latest report. They include Austin, Raleigh/Durham, Seattle and San Francisco.
Tech Cities 2.0 is an annual report that identifies existing and emerging tech centres increasingly driving the North American economy and details their impact on the commercial real estate (CRE) sector.
The report also found that cities that are targets for venture capital (VC) 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.
In the first of half of last year, 42 per cent of the square footage in the top 100 leases in North America were signed by tech companies and 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 per cent, surpassing the 62.7 per cent increase in San Francisco.
Average asking rents in cities like Atlanta, Austin, Seattle, and San Francisco have increased more than 50 per cent since 2010.
A follow-up from last year’s inaugural 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’ and ‘tech is important’.
Ken McCarthy, Cushman & Wakefield’s New York-based principal economist and applied research lead for the US, 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.
“Both start-ups and big tech companies are taking large chunks of high-rise buildings and trophy assets in dense urban areas”
“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,” said McCarthy.
The tech industry has changed the way its companies and also those traditionally non-tech approach commercial real estate, said Robert Sammons, Cushman & Wakefield’s senior director, Northern California Research.
“Both start-ups and big tech companies have recognised they need a footprint in the central cities to keep attracting millennial workers, and as a result, they are taking large chunks of high-rise buildings and trophy assets in dense urban areas - in addition to keeping their sprawling campuses in the suburbs,” Sammons said.
Tech companies are driving demand as they continue to hunt for space and "grabbing it" in certain hot markets when they can find it. “With unemployment at 4.0 per cent or lower in each of these markets, tech companies of all sizes are in a war for talent and must do their utmost to hold on to and recruit employees – and that means the best salaries, the best incentives, the best space and the best location," continued Sammons.
"That last point has generally meant an urban or even suburban location that is mixed-use, walkable, bikeable and near mass transit.
“The trend for the start-ups and tech companies to occupy large spaces in metropolitan areas is occurring all over North America and especially in the cities our report identifies as ‘Tech is a critical component of the local economy and CRE market."
Combining employment, occupations, venture capital investment, and demographics statistics, this year’s list from Tech Cities 2.0 is separated into three major categories.
Cities where technology is a critical component of the local economy and CRE market:
Cities where technology is a key driver of the local economy and CRE market:
Cities where technology is important to the local economy and CRE market, but there are other important sectors as well:
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