Austin Ranks In Top 10 For Tech Job Growth, Strong Office Demand, Rent Gains Despite COVID Slowdown
CBRE’s Tech-30 Report: Tech industry remains biggest force in office-leasing activity despite pandemic-induced slowdown
AUSTIN – Oct. 29, 2020 – The tech industry’s share of U.S. office-leasing activity in this year’s first half-inched down to 20 percent from 21 percent last year, as tech employment has proven resilient during the pandemic, according to CBRE’s annual Tech-30 report.
Austin ranked the eighth-fastest growing tech market in overall office rent growth, with rents increasing 9.1 percent in the two years ended June 30, up from 7.9 percent in the previous two-year period.
Austin saw a 5.4 percent gain in net absorption of office space (demand) in the same timeframe.
Net absorption, a proxy for demand, measures the amount of space newly leased in a time period against the amount newly vacated or offered for use by new tenants.
Buoyed by the resilience in the tech sector nationally, Austin added 11,857 high-tech jobs in 2018 and 2019 at a growth rate of 22.9 percent, ranking it third for high-tech job growth among the Tech-30, behind only Vancouver (29 percent) and San Francisco (27 percent).
High-tech employment growth accounted for 36.6 percent of new office employment in the metro during the same period.
The Tech-30 report measures the industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada.
CBRE found that pre-pandemic office rents increased in all but one of those markets in the past two years (ending June 30), with five posting double-digit percentage gains.
Net absorption – a measure of office space newly occupied in comparison to office space newly made available – registered net gains in 26 markets over those two years.
Top Tech-30 Markets
.
|
Market |
Office Rent Growth* |
Net Absorption* |
Tech Job Growth** |
|
New York City |
15.9% |
-0.4% |
18.4% |
|
Charlotte |
15.8% |
7.7% |
-10.9% |
|
Seattle |
11.8% |
3.7% |
21.9% |
|
Silicon Valley |
11.6% |
4.7% |
5.2% |
|
Atlanta |
10.4% |
2.6% |
11.4% |
|
Montreal |
9.3% |
3.7% |
-3% |
|
Nashville |
9.2% |
5.1% |
11.2% |
|
Austin |
9.1% |
5.4% |
22.9% |
|
Phoenix |
8.7% |
5.1% |
4.6% |
|
Raleigh-Durham |
8.5% |
6.4% |
7.1% |
- Figures measure from Q2 2018 to Q2 2020. ** Figures measure 2018-2019 over 2016-2017.
However, the impact of COVID-19 and related economic challenges clearly has affected the U.S. office market. Tech leasing activity declined by 46 percent in the second quarter from the 2019 average, in line with the 44 percent decline in overall U.S. office-leasing activity.
The amount of office space offered for sublease in the Tech-30 markets increased by 42 percent, or roughly 27 million sq. ft., to a total of 90 million sq. ft. so far this year. Tech companies account for a quarter of sublease space.
Perhaps the most resilient office markets in this downturn are leading tech submarkets, which often are located near universities. CBRE has found that average office lease rates in leading tech submarkets carry an 18 percent premium to average rates for their cities as a whole.
Those with the largest premiums are East Cambridge in Boston (137 percent), Santa Monica in Southern California (70 percent), and Palo Alto in Silicon Valley (72 percent).
To read the full Tech-30 report, click here.
