Tech Sector: The Neighborhood's Changing

Colin Yasukochi, CBRE’s director of research and analysis

LOS ANGELES—Technology firms may continue to lead the way in both job creation and office leasing across North America, yet the picture has changed compared to recent years. Notably, the pace of employment growth in the tech arena slowed in the first half of this year compared to the five-year average, CBRE Group Inc. says in the latest edition of its annual Tech-Thirty report analyzing the top 30 tech markets in the US and Canada.

In the fall of 2016, CBRE sees shifting demand among submarkets within the top 30, and varying levels of rent growth. ”The changing velocity and pattern of tech job creation has uniquely impacted office markets,” says Colin Yasukochi, CBRE’s director of research and analysis. “Markets that have experienced accelerated job creation are seeing faster rent growth and decreasing vacancies while slower-growing markets have seen more balanced conditions between landlords and tenants.”

The fastest job growth and heftiest rent premiums are commanded by a handful of submarkets, led by East Cambridge in the Boston metro area at 102%, and Palo Alto in Silicon Valley and Santa Monica in Los Angeles, each with an 82% premium. In turn, the higher costs and declining availabilities are leading to the creation of new tech clusters as tenants seek alternatives.