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Creative Tech Tenants Impact Leasing Activity Across the Nation

NEW YORK—Once heavily associated with the West Coast (Silicon Valley, in particular), creative office and tech space is making headway in other US markets, Colliers International's president of national office services Cynthia Foster tells GlobeSt.com.

By Carrie Rossenfeld | colliers | Updated on March 21, 2016
Cynthia Foster of Colliers International Foster: “Tech firms on the East Coast as well as secondary cities across the U.S. continue to be attracted to buildings and neighborhoods that offer unconventional office space, and the trend is effecting established sectors in other industries.”

NEW YORK—Once heavily associated with the West Coast (Silicon Valley, in particular), creative office and tech space is making headway in other US markets, Colliers International‘s president of national office services Cynthia Foster tells GlobeSt.com. Demand for space by tech companies is strong on the East Coast in New York City and Boston, as well as in secondary cities across the country. Moreover, the trend is also influencing established sectors in other industries that typically used more-traditional office space.

“The tech hub of the country still no doubt sits on the West Coast,” says Foster, and the statistics bear out, with the San Francisco office market being the leader of tech and creative office tenants. In fact, she points out, Salesforce is number two and Uber number four as the largest non-government users of office space. As a result, San Francisco has had a record-breaking five consecutive years of positive net absorption and had the largest net-effective rent growth in the country last year. Class-A space in that market saw a 12% year-over-year increase in 2015, and class-B had more than a 20% increase.

But this growth is not just limited to San Francisco. “We are seeing the impact in Boston and other mature markets throughout the country,” says Foster. Colliers reports that in Boston, for example, tech companies are moving in and expanding: TripAdvisor has a new 280,000 square-foot headquarters space in Needham, right outside of the city; Brainshark has undergone a 56,000-square-foot expansion; and Care.com took a 100,000-square-foot expansion in 2015.

“People on the East Coast may have underestimated the effects the tech tenants were going to have on the market, but the largest number of IPOs in this country last year for tech companies was in Boston,” says Foster. “To many, it is surprising that it was not companies founded in Silicon Valley, but of course we all know Boston is a world-leading center for higher education. The East Cambridge submarket, just outside of Harvard Square, is such a strong market, traditionally dominated by biotech and lab-space tenants. These tenants are now moving into the financial district because East Cambridge has limited availability.”

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