Technology is setting the course for much of the US office market as tech companies account for the largest industry share—20%-plus—of office leasing in the nation. Enter CBRE's 'Scoring Tech Talent' report. Now in its eighth year, the report analyzes which tech markets are gaining momentum, which are receding, which are more expensive, and which are less, as well as where the new tech jobs and tech graduates are generated. Featured above are the top five up-and-coming tech markets chosen by CBRE. The usual suspects—the San Francisco Bay Area, Washington, DC, Seattle, Toronto and New York—were ranked as the top five. GlobeSt.com connected with Lexi Russell, CBRE director of Research and Analysis and co-author of the Tech Talent report, to discuss how the pandemic might affect tech employment and what the momentum of various tech markets means for real estate.
How has tech talent fared so far in the pandemic and what's the outlook for these professions in the tough year or two ahead?
Russell: Technology now enables office workers to be more productive from more locations than was previously possible. This helps to make these occupations resilient to shocks like the pandemic. We looked at data from past economic downturns to test this and found that, during the Great Recession of 2008 to 2010, tech-talent employment across all industries declined by only 0.5%. In comparison, overall US employment declined by 5.5% in that timeframe. Our lives now are more interconnected by technology than we were during the Great Recession. Therefore, tech-talent jobs—which we define as 20 key tech professions including software developers and programmers—and other professions connected to them will fare better during this uncertain time.
You categorize markets as being either 'brain drain' or 'brain gain.' Is one better than the other? What are the advantages or drawbacks?
Russell: These are different attributes of successful markets. A 'brain drain' market has a strong position because it means that market produces more tech-degree graduates than new tech jobs—they are a net producer of tech talent. If a company is looking to expand, then a 'brain drain' market is a great place to think about for relocation or recruitment. Meanwhile, a 'brain gain' market is a net attractor of tech talent by adding more tech jobs than its universities can produce tech graduates to fill, which can lead to higher competition for that labor.
Which small markets are fast emerging as tech hubs that would surprise most people?
Russell: The Bay Area remains the top market for tech talent, but demand for tech talent and supply of tech jobs are rising across the board. For example, Salt Lake City's tech-talent workforce grew by an impressive 43% in the past five years to push it over 50,000 into the category of a "large" market. Many emerging tech-talent markets can be found outside the U.S. Our report highlights five Canadian markets in the top 50 that have been growing and are cost-effective alternatives to some U.S. counterparts. The Waterloo region of Ontario is a prime example. This year we added analysis on growing tech concentrations in Latin America led by Sao Paulo and Mexico City.
What defines a tech talent market? And what are the implications for the office market?
Russell: The size of the market's tech-talent labor pool is one factor. Just as important, tech-labor concentration—or the percentage of total employment—shows how "tech-centric" the market is. Because we are looking at technical workers from all industries—not just tech—high concentrations of tech talent can appear in markets you might not expect, like Charlotte, NC, and Madison, WI. The trend for increased office demand, and subsequently rent growth, correlates well with the increase in tech-talent employment. Amid the pandemic, it's possible that this trend may have slowed but not stopped. These resilient occupations need a space to continue innovating.
Does the growth of a market's tech-talent workforce affect other commercial real estate formats beyond office? If so, how?
Russell: Because of their skills, tech talent jobs enjoy a wage premium that has a multiplier effect on the local economy. Beyond the office, these workers can afford more than the average apartment and often patronize higher-end retail locations.
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