Press Release brought to you by CBRE/New England

High-Tech Industry Growth Powers Strong Rent Increases in Boston Over Past Two Years

08/20/2014

Wednesday, August 20, 2014

 

 

CBRE/New England Contact:

Kara DeMichele

Tel: 617.912.7038

kara.demichele@cbre-ne.com

 

 

 

High-Tech Industry Growth Powers Strong Rent Increases in Boston Over Past Two Years

Boston tanks in the top eight of U.S. markets for high-tech growth in a new CBRE report that finds high-tech companies account for 20% of major leasing activity in U.S. thus far in 2014, up from 14% in 2013

BOSTON (Aug. 20, 2014) — Robust high-tech employment has played a major role in the recovery of the U.S. office market and has helped fuel double-digit rent growth in eight U.S. markets over the past two years, including Boston, according to CBRE Group, Inc.’s latest research report, U.S. Tech-Twenty: Measuring Office Market Impact. The Bay Area accounted for the top three markets for rent growth—San Francisco, Silicon Valley and the San Francisco Peninsula respectively—followed by Manhattan, Denver, Austin, Boston and San Diego. 

The report, which tracks high-tech employment and office market conditions in 20 tech-oriented office markets across the U.S., found a strong correlation between high-tech job growth and accelerating office rents. From Q2 2012 to Q2 2014, Boston experienced 15.7% growth in high-tech jobs, while office rents grew by 11.2% during the same period. 

Markets experiencing the most growth acceleration in high-tech employment during the current period (2011-2013) compared to the previous period (2010-2012) include Austin and Salt Lake City, both experiencing a 4.3% faster growth rate to 34.2% and 15.7% respectively, and Orange County at 3.5% to 9.3%. Meanwhile the overall growth rate for rents in the current period (Q2 2012 to Q2 2014) compared to the prior period (Q2 2011 to Q2 2013) was led by San Diego (13.7% faster to 15.0%), Boston (12% to 11.2%), Orange County (6.7% to 5.2%) and Pittsburgh (6.5%). Seattle, Los Angeles and Raleigh-Durham also showed strong rates of growth at 3.1, 2.9 and 2.8%, respectively.

According to the report, the high-tech sector has accounted for one of every four new office-using jobs nationally since 2009. Within the Tech-Twenty markets, 15 grew their high-tech job base by 10% or more, including Austin (34%), San Francisco Peninsula (30%) and New York (23%), between 2011 and 2013. In 11 of the top 20 markets, high-tech jobs accounted for more than 20% of the total new office employment from 2012 to 2014, including Boston, where tech jobs accounted for 15.7% percent of all new office jobs in the two-year period.

“Within preferred submarkets, which, in many cases, are the neighborhoods of choice for millennials and high-tech companies, vacant space has become increasingly scarce. As a result, nearby submarkets may see increased leasing activity by tech companies,” said Colin Yasukochi, Director of Research and Analysis for CBRE Global Research and Consulting.

 

“The Boston market continues to evolve as a hub for innovative high-tech companies seeking value and access to 24/7 amenities,” added Kevin Kennedy, First Vice President of the Urban Brokerage group in Boston and member of the CBRE Technology & Media Practice with a focus on New England. “Co-working/incubator companies are continuing to expand, indicating growing support of high-tech companies who desire to be in the Seaport District and CBD, in addition to Cambridge.”

Other highlights of the report include:

·       High-tech was the top industry leasing office space in the U.S., accounting for 20% of major leasing activity thus far in 2014, up from 14% in 2013.

·       San Francisco topped the U.S. Tech-Twenty Office Markets list for the third straight year. Over the past two years, San Francisco’s high-tech job base has grown by 51%, while average asking rents have climbed 35%. The key ingredient to this “tech-effect” on the office market is the concentration of high-tech employment in each market and how dominant new high-tech job creation is relative to overall office-using employment.

·       The rent premium commanded by submarkets with heavy high-tech employment is increasing. The average office rent aggregate of the Tech-Twenty submarkets was 18% higher than the Tech-Twenty overall markets.

·       From an investor's perspective, San Diego, Portland and Orange County offer the greatest potential. These markets are also attractive to occupiers, although Raleigh-Durham offers the best combination of low office rents and a growing high-tech labor pool.

·       CBRE’s two-year outlook foresees favorable economic and job creation conditions at the national level and continued outperformance by the high-tech industry, although valuation concerns are surfacing. At the heart of high-tech’s growth is strong demand for products and services from consumers. As long as high-tech companies align themselves with this demand, the unrealistic growth and valuation expectations that defined the dot-com bubble should be avoided.

To request a copy of the report or to speak with a CBRE expert, please contact Kara DeMichele at 617.912.7038 or kara.demichele@cbre-ne.com.

 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue).  The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

 

About CBRE/New England

CB Richard Ellis – N.E. Partners, LP, a joint venture with CBRE Group, Inc. has offices in Massachusetts, Connecticut, Rhode Island, Maine and New Hampshire. Please visit our website at www.cbre-ne.com. CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

##

08/20/2014 - 11:03

Source

CBRE/New England

Want more news about CBRE/New England? Click here