What constitutes STEM employment may vary from NextTech market to market. In contrast to some of the core tech markets, which house a cross-section of the tech sector, the NextTech markets tend to exhibit specializations in one segment or another.

“As this degree of specialization intensifies, and the tech sectors of the NextTech markets claim an ever greater share of their economies, we believe that the 'tech market' designation itself may become outmoded,” according to the MetLife report. “In the near future it may be far more appropriate to refer to them as defense markets, biotech markets, or robotics markets. We believe the fortunes of these specific industries, not those of an ambiguous and amorphous 'tech sector,' will drive future STEM job growth and commercial real estate demand.”

For investors, this specialization offers the advantage of opportunity to tailor their risk and investment strategies, “By gaining exposure to the NextTech markets they can maintain an overweight toward high-income STEM jobs while reducing the risk presented by concentrating their investments solely in the core tech markets,” according to the MetLife report.

Along the same lines, “investors can expand their opportunity set by focusing on the future of individual industries and technologies. As many of these markets remain early in their transitions toward STEM, investors are likely to enjoy this opportunity for several years.” Early movers are apt to enjoy the greatest benefits in terms of NOI and value growth, though, MetLife says.

NEW YORK CITY—Between 2014 and 2016, the US added nearly half a million jobs in the so-called STEM (science, technology, engineering and mathematics) sector. However, less than one third of those jobs were located in the usual suspects, such as Silicon Valley, Austin and Seattle. Instead, 345,000 of the 490,000 STEM positions created during that period could be found primarily in what MetLife Investment Management calls NextTech markets, including Washington, DC; Pittsburgh; Salt Lake City; and San Diego.

“The NextTech markets are poised to outperform in this cycle and the next,” says Adam Ruggiero, associate director, MetLife Investment Management. “The shift towards specializations in these markets also offers investors the opportunity to place strong bets on the technologies of the future and the real estate demand their success will generate. They offer lower concentration risk, strong starting yields, solid income growth and rich future valuations.”

A new report from MetLife Investment Management's real estate division, “Tech Markets 2.0,” makes it clear that the core tech hubs continue to set the pace in terms of STEM growth and the sector's role in local economies. However, the report notes a broadening of employment beyond the Big Six of Austin, Boston, Raleigh, San Francisco, San Jose and Seattle, especially as well-compensated and in-demand tech industry workers seek out opportunities across the nation.

“Situated along both coasts and in numerous locales in between, these markets mimic those of the core during an earlier stage of life,” the report states. “Often supported by strong university systems, enjoying substantially lower costs of living, and benefiting from the skill and experience of transplants from the core, the NextTech markets have witnessed a rapid increase in STEM employment over the past three years. These increases are gradually reshaping their local economies as STEM employment makes up an ever greater share of the total.”

What constitutes STEM employment may vary from NextTech market to market. In contrast to some of the core tech markets, which house a cross-section of the tech sector, the NextTech markets tend to exhibit specializations in one segment or another.

“As this degree of specialization intensifies, and the tech sectors of the NextTech markets claim an ever greater share of their economies, we believe that the 'tech market' designation itself may become outmoded,” according to the MetLife report. “In the near future it may be far more appropriate to refer to them as defense markets, biotech markets, or robotics markets. We believe the fortunes of these specific industries, not those of an ambiguous and amorphous 'tech sector,' will drive future STEM job growth and commercial real estate demand.”

For investors, this specialization offers the advantage of opportunity to tailor their risk and investment strategies, “By gaining exposure to the NextTech markets they can maintain an overweight toward high-income STEM jobs while reducing the risk presented by concentrating their investments solely in the core tech markets,” according to the MetLife report.

Along the same lines, “investors can expand their opportunity set by focusing on the future of individual industries and technologies. As many of these markets remain early in their transitions toward STEM, investors are likely to enjoy this opportunity for several years.” Early movers are apt to enjoy the greatest benefits in terms of NOI and value growth, though, MetLife says.