By Meghan Hall
More than six million workers across both the United States and Canada comprise the technological talent that is driving not just innovation, but real estate booms across the country. This year, more than ever, the importance of technological innovation has been highlighted across a variety of sectors as the world attempts to connect, work and play from home. According to a tech talent score released by brokerage firm CBRE—which measure markets’ depth and vitality across 13 different metrics—the San Francisco Bay Area, Washington D.C. and Seattle markets are the top three in the nation for tech talent.
In the United States, there are about 5.4 million tech talent workers spread across 20 different occupations, including software developers, data managers, and others. While these workers only comprise about 3.7 percent of the U.S. population, CBRE states that they have an outsized impact on real estate markets and the economy. Tech talent occupations have added 777,000 jobs over the past five years, more than twice the national average.
The report, released annually, typically pulls data from the previous year. However, as the current pandemic took hold, the study also sought to understand how tech-based occupations, and the markets in which they are concentrated, would be impacted. The report found a silver lining: over the previous two recessions, tech occupation has remained relatively stable amidst downturns. In the 2008-2009 global financial crisis, for example, tech talent employment dipped just half a percent, while overall unemployment declined 5.5 percent.
“The data for these occupations is put out annually from the bureau of labor stats but as soon as the pandemic became very evident as we were collecting this data early on, we did want to know more,” explained CBRE’s Director of Research & Analysis Lexi Russell. “…These occupations have shown resilience during the last recession, and I would argue that we are more reliant on tech now than we were then…They are the ones that have also been integral in keeping us productive while working from home.”
Russell added, “It is a silver lining, I would say, in that historical aspect of the data.”
The strength in CBRE’s top-ranked markets come from a variety of fundamentals. In the San Francisco Bay Area, for example, tech talent makes up 10.5 percent of the population—more than any other market. Washington D.C. and Seattle have concentrations of 8.8 percent and 7.7 percent, respectively.
Seattle and Washington D.C. were ranked as the top two markets for educational attainment with 65 percent and 60.4 percent, respectively, of residents 25 years of age or older have attained a bachelor’s degree. The Bay Area, not far behind, ranked number eight at 51.7 percent. However, the Bay Area is the strongest ranked market nationally for tech job creation, adding 52,000 more tech talent jobs than graduates.
“These are all large tech talent markets; the size of the tech talent labor pool plays an important role for clustering of companies and tech talented,” stated Russell. “All of the markets have varying extents of [these fundamentals], but the Bay Area, Washington D.C. and Seattle are fighting for the top of those metrics.”
The San Francisco Bay Area also had the highest average tech worker salary, at $136,000 per year. Seattle followed behind, at $119,000 per year. These fundamentals have also translated to more activity in the commercial real estate industry. In both markets, the tech industry has been a top driver of office leasing activity. Nationwide, the high-tech industry’s share of leasing activity increased to 22 percent in 2019, up from 11 percent in 2011.
Ultimately, how the commercial real estate industry will respond is unclear, although CBRE predicts that demand for office—and housing—could finish at lower levels than in 2019. Prior to COVID-19, the San Francisco Bay Area saw rent growth of 43 percent over the past five years. Seattle saw rent growth of 37 percent, and Washington D.C. saw rent growth of 12 percent.
“There’s been a pause on big decision making, particularly when it comes to large, capital expenses like real estate,” admitted Russell.
“We’ve hit what I would term, ‘The Great Economic Pause,” continued Russell. “The shutdown really put a cap on all economic activity. The resilience has been in those industries that are able to work from home.”
Work from home could have long-term implications for real estate as companies evaluate just how many of their employees need to be in the office, and whether those employees choose to work remotely from other locations outside of their typical tech bubble. Workers could be drawn to less expensive and growing technology hubs in the future, as well. Russell also believes, however, that the gravitational pull of large, established tech markets like the Bay Area and Seattle will remain.
“One of the things I love about this report is that you can take a look at any one of these markets and find a gem,” said Russell. “We’ve seen tremendous growth over the past five years in every single one of these markets… When I look at these numbers, it just shows me that we are right on the track [and] heading towards more of a growing expertise in tech and tech talent across these markets and the United States.”