The Latest in Tech Will Drive Leasing In Certain Hubs

Industry sectors can be evaluated for their overall performance, but categories within may indicate differences in strength or weakness. That’s the case with the tech industry, which Savills Research & Data Services recently looked at for how it fared in the second quarter of this year as well as the first half.

Savills’ report revealed contraction for the industry when it comes to leasing demand after it experienced a big growth cycle. This is due in no small part to investors becoming pickier about what innovations they will fund. What many venture capitalists are specifically eyeing now is the transformative technology verticals category, making real estate leasing in demand for tech hubs where innovators might incubate and roll out current and future inventions. Tech companies have a symbiotic relationship with their hubs, so their choice of location factors into potential success, the report says.

But what exactly is transformative technology verticals or TTV/? It’s defined as innovative tech that develops significant social, economic or cultural changes, which have the potential to revolutionize how we live, work and connect. Examples include the internet, smartphones, social media, artificial intelligence (AI) and more, according to The Tech Edvocate. Go way back and whoever invented the wheel or even the knife that made sliced bread possible had a similar-type invention and light-bulb moment that led to a globally changing phenomenon. The difference today is the speed at which the new inventions emerge, catch fire and are adopted, according to The Tech Edvocate.

And when these new tech ventures do come on the scene, they have the potential for huge growth and consequently bring with them demand to lease facilities. As a result, companies in these verticals look to align their real estate strategies with growth projections. Both AI and machine learning are leading the way with $13.4 billion raised across the top 100 VC deals in this country because they’re so essential for a slew of industries to turn innovation into reality such as producing autonomous vehicles.

 OpenAI, a U.S. AI research laboratory. raised $10 billion in January alone, the third biggest fundraise for tech in more than a decade. Other transformative technologies include health tech or life sciences at $3.5 billion and green tech at $2.2 billion, which includes both climate and clean tech.

After analyzing the top 30 VC deals in the top 10 major tech hubs—Atlanta, Austin, Boston, Chicago, Denver, Los Angeles, New York, San Francisco, Seattle and Silicon Valley, Savills found the same verticals consistently received the largest share of funding. For example, health tech or life sciences received funding in all 10 tech hubs. AI and ML raised the most overall. Green tech and fintech received funding in nine markets. Cybersecurity made the top five verticals and software as a service received fundraising in eight markets.