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Tech Firms Find Good Office Deals in OH

CLEVELAND—The state has many low-cost office markets, according to JLL, and high-tech companies will find tenant-favorable conditions in most submarkets, making OH an attractive alternative to markets like San Francisco, Boston and New York.

By Brian J. Rogal | brianjrogal | | Updated on March 01, 2016

 

col-SciotoGreenway_FeaturedImage (2) Columbus plans to bring more parkland and recreational space to its riverfront, making the urban core more appealing to the younger tech workforce.
CLEVELAND—The tech business has famously been one in which scrappy start-ups regularly discover something new and upend the industry. But these days those start-ups are finding it very difficult to afford space in national tech hubs such as Silicon Valley, which have become among the most expensive markets in the US. Even relatively established players sometimes feel squeezed by the high rents, and some have started looking for space in secondary or even tertiary markets that won’t drain their bank accounts. And according to the newest technology office outlook report from JLL , the best deals for tech firms can be found in Cleveland, Columbus and Cincinnati. All three were rated even cheaper that Detroit, a city which already hosts a nascent tech industry.        On the OH cities, JLL research manager Andrew Batson tells GlobeSt.com that “on the front end the input costs are less. The land is less expensive and building materials and labor are comparatively less.” “On the back end, the office rents are more affordable, so the aggregate value of the rent rolls are less and therefore the appraisals come in lower. Demand also plays a role, institutional investors willing to pay a premium have not been heavy hitters in these markets. And with comparatively less demand, we haven’t seen prices bid up. The ownership diversification in the OH markets has historically been a mix of owner-users, local and regional investors. That is until more recently, due to primary markets being oversold in the current cycle.” Columbus is not a city that people usually associate with the high tech industry. But JLL found that venture capital firms have started to take notice, partly because it already has a core of tech firms and a huge student population from which companies can draw new employees. “ Low costs, a young, educated workforce, and a large corporate employee base have made Columbus an enticing option for tech companies looking to expand operations outside of primary tech markets,” says JLL r esearch analyst  Ross Bratcher . About 20,000 people work in the Columbus tech industry. One challenge for tech firms has been finding spaces near the urban core. According to JLL, some have had to rent space in the suburbs, which tech employees find less attractive. Still, the industry attracted $45 million in venture capital funding during 2015, not much by the standards of Denver or Charlotte, but enough that JLL expects Columbus tech to see exponential growth this year.    The Cincinnati tech scene brought in $77 million of venture capital funding, and with its many corporate headquarters and universities, it feels a lot like Columbus. Its Midtown submarket is near the urban core and has large blocks of available space for companies that want to be in a secondary market. CDK Global , for example, a Hoffman Estates, IL-based computer solutions provider, recently relocated one of its offices to Midtown and expanded to 161,397 square feet.        Cleveland has the largest tech industry among the big OH cities. The roughly 28,000 high-tech workers occupy a variety of spaces, including the suburban campuses of Progressive and Hyland Software , and the co-working options downtown. The city has found it difficult to retain its high tech firms, especially as these reach the maturity stage. However, JLL researchers say Cleveland remains a “low-cost office market, and high-tech companies will find tenant-favorable conditions in most submarkets, making Cleveland an attractive alternative to markets like San Francisco, Boston and New York.”     

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