How VC Funding Could Give Office a Much-Needed Boost
So far this year, $315.3 billion in new VC money has been raised globally.
Hiring data across hundreds of firms that received venture capital-backed funding may provide a clue into how those cash infusions will impact CRE, according to a new report from Newmark.
The 500 US firms Newmark analyzed and cross-referenced against LinkedIn data raised a total of $44.9 billion and posted 22,582 job openings since April 2021, translating to about 3.4 million square feet of CRE demand. That’s about 7,500 square feet of demand for every $100 million raised, if you assume 150 square feet per worker. If you assume 200 square feet per worker, that equates to 10,000 square feet of demand per $100 million raised.
But Newmark analysts say these numbers are likely “considerably lower than the reality.”
Here’s why: according to LinkedIn, about 85% of jobs are filled by networking, and not every company uses the platform to find candidates. And what’s more, the survey occurred in early July, meaning some of the companies funded since April have already filled open jobs.
“Total employment growth from the sample set is likely anywhere from 30.0% to 50.0% higher than what the job postings data suggests,” the report notes. “This means that even using a ratio of 10,000 square feet of demand for every $100 million raised is likely far below the reality, possibly by half. Anecdotal evidence shows the ratio is likely something closer to 25,000 square feet of demand for every $100 million raised, but a number that is easily and logically defensible is a minimum of 15,000 square feet per $100 million raised.”
So far this year, $315.3 billion in new VC money was raised globally, with $166.4 billion raised in Q2. Prior to the pandemic, annual VC investment had averaged around $164.1 billion annually. The B2C and healthcare/life science sectors have gained the most market share and account for about 20% of global VC investment each.
The US is the dominant market for new VC investment, according to Newmark, and accounts for more than half of all funds raised, followed by China. Since the first half of the year, VC funding in the US has been focused mainly on artificial intelligence, fintech, TMT, SaaS, and big data.
“Under normal circumstances, these numbers would suggest a commercial real estate boom in the making, at least within markets where there is a heavy tech focus,” the report states. “They still do, though it will be tempered by the pandemic.”