Raleigh-Durham, North Carolina, September 27, 2018 –Cushman & Wakefield today released Tech Cities 2.0, an annual report that identifies existing and emerging tech centers increasingly driving the North American economy and details their impact on the commercial real estate sector. Raleigh-Durham has again emerged within the top 25 U.S. tech cities, alongside Silicon Valley and San Francisco.
“Raleigh-Durham’s blend of highly educated, available talent; inventory of space; and affordability all keep the region high on technology companies’ site-selection list,” said Bob Van Wormer, Cushman & Wakefield Senior Director in Raleigh-Durham who specializes in tenant brokerage with an emphasis on the tech sector. “Added to that is now an undeniable vibe, particularly in the urban cores of Durham and Raleigh, that fosters the energy, creativity, culture and community that tech talent is so clearly seeking. I don’t see any of these dynamics going away anytime soon, and Raleigh-Durham will continue to enjoy being on the radar of technology companies.”
A follow-up from last year’s inaugural Tech Cities 1.0 report, this year’s research reviewed all major North American markets and groups the top cities into three categories based on how important the tech sector is to the local economy and real estate market: ‘tech is a critical component’ / ‘tech is a key driver’ / ‘tech is important’.
“As tech companies continue to dominate headlines and grow, a key question is how this affects commercial real estate. Building upon our inaugural Tech Cities report from last year, Tech Cities 2.0 offers new data and a further in-depth analysis of the marketplace,” Revathi Greenwood, Cushman & Wakefield’s Americas Head of Research, said.
“Tech is no longer limited to just traditional technology companies – media companies, retailers and even law firms are competing for the same spaces and talent as traditional tech companies. While the result can be seen in nationwide trends, we’ve identified key insights that impact companies across every industry,” Greenwood said.
Ken McCarthy, Cushman & Wakefield’s New York-based Principal Economist and Applied Research Lead for the U.S. said Tech Cities 2.0 demonstrates the profound impact the tech sector has had on commercial real estate in what appears to be one fell swoop but has been building since the financial crisis of 2008.
“Although we expect established markets like Silicon Valley to see continued investment, new tech hubs are emerging across North America, from Provo to Philadelphia, sustaining a period of tech-driven, economic growth unseen since the dot-com boom of the late 1990s.”
McCarthy said New York City had seen significant growth in the TAMI sector (Technology, Advertising, Media and Information). “If Silicon Valley is the brains of the tech sector, then New York City is the creative center. In this cycle, tech has been very important to New York City. TAMI employment growth has been much stronger than many other sectors and that growth has been centered in that Midtown South of Market, and that market in particular has seen significant growth in terms of both property values and rents.”
The tech industry has changed the way its companies approach commercial real estate in the Raleigh-Durham market said Van Wormer.
“In the battle to recruit and retain tech talent, it has never been more important for a technology company to get the real estate and facilities dynamics right. Not only must the facility be designed with the right vibe, it must also be served with unique amenities and offerings, particularly relative to wellness – healthy food, fitness, clean air and abundant light.”
Van Wormer adds that urban cores are greatly preferred over suburban campuses by most tech companies – except when a suburban location central to employees is a better fit. “The Triangle sets up well for this with the Research Triangle Park/I-40 corridor as the region’s largest submarket, where 2 million square feet of new Class A office is under development,” he said.
Suburban landlords’ reaction to tech tenants’ and their employees’ demand for CBD environments marks another evolving trend in the Raleigh-Durham market, said Ben Litke, Cushman & Wakefield Senior Associate, who also specializes in tenant brokerage with an emphasis on technology.
“New-construction projects consistently deliver on-site amenity centers including fitness, grab-and-go café’s and conferencing centers in an endeavor to replicate live/work/play environments previously unseen outside of the CBDs,” Litke said. “Additionally, many second-generation office and flex parks are re-branding and converting previously vacant areas into amenity centers in order to stay competitive with new construction and CBD product.”
Combining employment, occupations, venture capital investment, and demographics statistics, this year’s list from Tech Cities 2.0 is separated into three major categories:
Tech is a critical component of the local economy and CRE market:
- Salt Lake City
- San Diego
- San Francisco
- Silicon Valley
- Washington, DC Metro
Tech is a key driver of the local economy and CRE market:
- Dallas/Fort Worth
- Minneapolis/St. Paul
- Portland, OR
Tech is important to the local economy and CRE market, but there are other important sectors as well:
- Greater Los Angeles
- South Florida
- New York City
Key findings from Tech Cities 2.0 include:
- In the first of half of last year, 42% of the square footage in the top 100 leases in North America were signed by tech companies.
- The fastest growing tech employment market since 2010 is Provo, Utah. Though a smaller market than the others on the list, the number of people employed by tech companies increased 64.9%, surpassing the 62.7% increase in San Francisco.
- Average asking rents in cities like Atlanta, Austin, Seattle, and San Francisco have increased more than 50% since 2010.
- Property prices are skyrocketing. Among the Top 25, property prices have increased on average by 59%, with the greatest increases happening in Austin, Silicon Valley, and San Francisco.
- Cities that are targets for venture capital funding are the most important tech cities in North America. Among the Top 25, VC funding grew by an average of $2.0 billion compared to $457 million for the top 101 markets.
- The top four cities for new construction are all cities where tech is a critical factor in the local real estate market, including: Austin, Raleigh-Durham, Seattle, and San Francisco.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.