JLL: High-Tech Services Distinguish Dot-com Boom From Today

By Sharon Simonson

High-tech service companies engaged in ecommerce, social media, cloud software and affiliated industries are leading the technology job-growth boom in Silicon Valley, San Francisco and the Peninsula, filling offices vacated by less prosperous sectors not only in the Bay Area but in select other markets nationally, according to new research from Jones Lang LaSalle.

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Job creation in sectors such as computer systems design, smart-phone app development, software publishing and online auctions, shopping and search is fueling demand for office space locally and in the nation at large. Of the more than 500,000 office-using jobs created nationally from February 2010 to September 2011, a quarter of them were in high-tech services.

In the Bay Area, even as total office employment fell nearly 12 percent to 750,000 jobs in the last 12 years—from 2000 through 2011—the number of high-tech services jobs has risen by 37 percent, or more than 46,000. “High tech services jobs are growing at four times the pace of office jobs and traditional financial and professional services,” said Amber Schiada, a senior research analyst for Jones Lang and the lead researcher behind three new Bay Area graphic reports that highlight statistical differences between the present and the late 1990s dot-com boom.

“Ten or 12 years ago we were manufacturing the hardware and software components and making the chips. There was the ecommerce bubble. Now we have shifted to cloud computing and software development, and it is really being driven by the engineering and salespeople behind these products,” she said.

Jones Lang clients including real estate investors and corporate real estate users—many of them in the high-tech industry—have peppered brokers for the financial and professional services firm to clarify the differences between the current Bay Area technology boom and that of the late 20th century. “One of the big questions we get from everyone is, ‘How long is this going to last?’ We don’t know,” Schiada said. “But there are several metrics we can look at. We are trying to make people think about these questions. We don’t offer conclusions.”

In total, at the end of last year, the region had not quite 172,000 high-tech services jobs compared to just more than 125,000 near the peak of the dot-com boom.

The rate of growth nationally in high-tech services is fastest in San Francisco, where the job count in the sector has risen 71 percent to nearly 31,000 since 1999. But Silicon Valley, with more than 88,000 high-tech services jobs in Santa Clara County and another 27,600 in San Mateo County, remains the King Kong.

San Francisco County is the only one of the four Bay Area counties tracked by Schiada’s research where median incomes have grown—2 percent—on an inflation-adjusted basis since 1999, as expressed in 2010 dollars. At $87,000, Santa Clara County continues to have the highest median income, though it remains 7.7 percent below its 1999 level. The San Mateo county median income is down 4.5 percent to $86,000; in Alameda it is down 2 percent to $69,000.

Schiada’s Bay Area-centric work piggybacks on and refines JLL research completed in September on the high-tech industry nationally and its influence over the U.S. office market.

Nationally, high-tech services employment has grown consistently since 2004, taking a step back only in 2009. Office employment overall, excluding the high-tech services sector, plunged in 2008 and 2009 and has resumed slow growth. High-tech services remain a fraction of national office employment, accounting for about 2.2 million jobs of the more than 25 million office-using jobs.

“It’s not just the Internet, but smart-phone software and business software development that is driving job growth in the high-tech services category,” Schiada said.

The research also illustrates why some high-tech companies may be feeling the talent shortages more than others. The median workforce age at Facebook Inc., Google Inc., Apple Inc. and Amazon.com Inc.—the tech companies most associated with today’s economic expansion—is considerably younger than that of stalwarts such as the Hewlett-Packard Co.

But the Bay Area population of people aged 18 to 34 is falling, down by 50,000 in the last 12 years.

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