Tech-Oriented Office Submarkets in San Francisco, Silicon Valley and New York City Seeing Double-Digit Rent Growth Over Two Years
Job growth in the high-tech sector is fueling strong rental rate growth and declining vacancies in tech-oriented office markets across the U.S., according to a new report entitled “Tech-Twenty Office Markets,” released today by CBRE Global Research and Consulting.
Between 2009 and mid-2012, high-tech service jobs in the U.S. grew by 9.9%, while non-farm jobs grew by 1.7%. The strong job growth in the tech sector was most impactful in the San Francisco, New York City and Silicon Valley office markets. More far reaching, were the impacts felt in the top 20 tech-oriented office submarkets across the U.S., where 15 experienced increased rental rates over the past two years. Rental growth was strongest in Silicon Valley’s Mountain View submarket, with 83% growth, followed by San Francisco’s SOMA submarket, at 59%; Boston’s East Cambridge submarket, at 28%; and New York City’s Midtown South, at 24%.
“The strengths of these tech-centric office submarkets, with strong rental rate growth and declining vacancies, are major factors supporting the overall office market recovery,” said Colin Yasukochi, CBRE’s director of research and analysis. “With the high-tech economy growing nearly six times faster than the national average, we expect that these submarkets will continue to outperform, helping to counterbalance tepid job growth in other sectors and the uncertain economic environment.”
Other highlights of the report include:
- The number of high-tech services jobs grew in 18 markets, with San Francisco, New York City and Silicon Valley growing by 41%, 22% and 18%, respectively, over the past two years.
- With limited job growth in other sectors, the high-tech services sector is driving the local economic and office market performance in these markets.
- Over the past two years, vacancy rates have fallen in 18 submarkets, including double-digit declines in the SOMA (San Francisco), Hillsboro (Portland), Redwood City (San Francisco), Northwest (Austin), Southvalley (Salt Lake City) and Lake Union (Seattle) submarkets.
- Ten submarkets saw overall demand for space—or net absorption as a percentage of building stock—grow by more than 10%, led by Lake Union (Seattle), with a 22% improvement, followed by Hillsboro (Portland), at 19%, and SOMA (San Francisco), at 11%.
- Cities to watch in terms of future office market potential include Salt Lake City, Denver and Portland.
- High-tech growth cycle is still in early stages with further growth and business cycles ahead. While economic worry has surfaced within high-tech, both consumers and venture capitalists have responded by focusing spending and funding on key high-tech areas that should fuel further growth.
To view the full report click HERE.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.