CHICAGO-The return of the high-tech office market is pushing rapid growth in areas such as San Francisco, Silicon Valley and Baltimore, with a job growth rate nearly four times faster than the national average, according to a recent Jones Lang LaSalle study. However, the company’s experts in this phenomenon, which witnessed a dramatic fall in the dot-com bust of 2001, said the growth should be sustainable this time around.
According to the JLL study, of the more than 500,00 office jobs created nationally since February 2010, more than 25% were in high-tech services. Office markets with large high-tech clusters have more than outperformed the rest of the country with strong rent growth and absorption.
Colin Yasukochi, a research director for JLL, tells GlobeSt.com that new smartphones, tablets, Internet TVs and other gadgets and the applications that power them have created an amazing new employment sector. Though this growth hasn’t spread really into the industrial markets, as many of the products are still made overseas, the innovation is clearly taking place in the United States, he says.
The technology boom closely follows the Internet boom of the late 1990s, when the service and corresponding Web browsers took off with consumers. Companies were known to form without a need for profits or even a product, and venture capital chased them, though many went bust as the bubble burst around 2000.
Today, venture capitalists are more careful, Yasukochi says. “Venture capital funding is far lower than it was during the dot-com years,” he says. “Plus, stock valuations are more in line with the regular market trends.”
The movement has also changed the entire office market, as high-tech companies are more wont to use larger open spaces and smaller work-spaces, say industry experts. The move is led by the technology itself, as more work can be done remotely and data stored over the air instead of through cables. The average amount of space allotted per employee has dropped from about 400 square feet in 1985 to 250 square feet today, and that will drop to about 150 square feet in the future, according to the study.
Silicon Valley has seen rent increases of up to 30% and San Francisco office rents are up 18.5% in the past year, according to JLL. The New York City submarket of Midtown South is also experiencing record low vacancy due to a number of high-tech firms, and Seattle and Baltimore are also seeing similar growth spurts.
The high-tech growth can also be attributed to the steady stream of new data center development announcements in cities such as Chicago and Beijing. “All this data, such as social media and cloud computing, has to be stored somewhere,” Yasukochi says.
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