Silicon Valley is still the nation’s tech capital, but according to new stats, it might not be for long.
Data from Cushman & Wakefield, a commercial real estate service company based in Chicago, shows several other cities gaining ground in the tech sector—particularly from a real estate standpoint.
Salt Lake City Sneaks Up
According to the firm’s latest “Spotlight on Tech Leasing” report, Salt Lake City saw the second-most tech-related commercial leases last year and now claims the ninth-largest share of tech tenants in the country. Tech companies accounted for more than 66% of all major commercial leases signed in 2018—more than even well-established hubs like San Francisco, Seattle and Denver.
And though affordable rents may play a role—the asking rent last year was $24.31 per square foot, a fraction of what San Francisco and Silicon Valley command—according to Ken McCarthy, principal economist at Cushman & Wakefield, there are other factors at work here as well. Namely? The city’s tech talent and its surging Millennial population.
According to data from real estate services firm CBRE, Salt Lake City has one of the largest concentration of Millennials in the country. About 21% of its residents are in the 23-to-28 age range, compared 13.9% of the country’s population at large. CBRE also ranked SLC at No. 22 on its list of cities for top tech talent.
Still, Salt Lake City isn’t the only city gaining ground in the tech scene. Cushman & Wakefield’s data shows Boston with a healthy amount of tech growth as well. Last year, nearly half of all major commercial leases came from the technology space.
McCarthy, who is also head of applied research at the firm, said talent and access to venture capital funding are major contributing factors. “Of course, having MIT and Harvard across the river in Cambridge helps as well,” he said.
According to Matt Dolan, a Boston-based real estate broker, the rise of the city’s tech scene has been obvious on the ground.
“There’s been a lot of momentum from tech employees entering the market,” he said. “The successful Boston tech startups are known for their close-knit culture. As soon as one person buys, several follow suit. We’ve had repeat buyers from a handful of companies.”
There’s also been an uptick in renters as well as real estate investors, Dolan said.
Other Cities on the Rise
But Boston and SLC aren’t the only cities to watch in the tech space. According to McCarthy, Austin, Texas, and Nashville are also burgeoning “new tech clusters” that have been on Cushman’s radar.
“More and more companies are following the talent and that has led to more tech centers rising in non-traditional locations,” he said. “We would expect that pattern to continue.”
If the latest data is any indicator, tech will continue to play a major role in the commercial real estate market—not just in these few cities, but across the nation at large.
In total, technology companies accounted for more than a quarter of all new commercial leases signed last year—the most of any industry. Tech companies also took on more space per lease than organizations from other sectors. The average tech-related lease clocked in at more than 71,000 square feet; non-tech leases were barely half that.
As McCarthy put it, “One thing is clear. Technology is now the dominant sector in the U.S. office market. Don’t expect that to change any time soon.”