These Top 7 Tech Cities Are Undergoing A Tenant Boom

With technology impacting just about every aspect of daily living, tech is undergoing a boom. Metro areas are experiencing an influx of companies, from startups to tech heavyweights, expanding into new markets. Cushman & Wakefield recently reviewed tech growth in U.S. markets and analyzed the number of educational institutions, the percentage of tech and knowledge workers and the amount of venture capital funding. The top 25 markets are highlighted in its Tech Cities 1.0 report.

These top 25 markets experienced a 2.2% job growth from 2009 to 2017 compared to 1.7% for all other markets. The cities had a sharper occupancy change of 5% from 2010 to Q1 2017, compared to other markets with 3.2%. Asking rents also increased more in the top tech cities with 29.4% rent growth from 2010 to Q1 2017 compared to 11% rent growth in other markets.

Check out the top seven markets below.

1. San Jose/Silicon Valley

Number of prominent educational institutions: Six

Percentage of tech workers: 27.4%

Percentage of knowledge workers: 36%

Venture capital funding: $6.7B

Silicon Valley has long been the tech capital and headquarters to some of the biggest tech companies. Silicon Valley and San Francisco have been red-hot over the last six years, according to Cushman & Wakefield, but the brokerage expects a continued expansion at a slower, more sustainable rate in the future.

The top tech companies in the San Jose and Silicon Valley region include Amazon, Facebook, LinkedIn and Samsung. Google may soon have its largest campus near downtown San Jose — the company is considering a 6M SF to 8M SF campus. Amazon also plans a massive expansion in Sunnyvale at Moffett Towers II.

2. San Francisco/San Mateo

Number of prominent educational institutions: Six

Percentage of tech workers: 15.6%

Percentage of knowledge workers: 28%

Venture capital funding: $28.5B

San Francisco has benefited from Silicon Valley companies wanting to expand into the city. Tech tenants make up about 60% of the companies leasing space in San Francisco. Fintech is growing fast within San Francisco as well. With about 3M SF of office space to deliver this year, there will be plenty of opportunities for more tech firms to carve a space for themselves in San Francisco. Large tech leases signed so far this year include Salesforce at its namesake tower, App/Dynamics, Otto, Affirm and Google.

Oakland also is emerging as a growing tech market with many tech companies moving into the East Bay city to escape the high rents of Silicon Valley and San Francisco. Downtown Oakland has made a comeback in recent years and posted record low vacancy at 4.5% during the first quarter.

3. Washington, D.C.

Number of prominent educational institutions: 14

Percentage of tech workers: 10%

Percentage of knowledge workers: 27%

Venture capital funding: About $1B

Washington, D.C., has emerged as a top tech city due to its strong educated workforce, life science hub and proximity to several top universities and the federal government. A lot of tech companies are having a more significant impact on policy and the growing cybersecurity sector. Facebook, Google, Yahoo and Amazon have a presence in the nation’s capital. New tech companies have been flocking to D.C., including the likes of Social Tables, EverFi, Blackboard, Cvent and 2U.

4. Boston/Cambridge

Number of prominent educational institutions: 20

Percentage of tech workers: 10%

Percentage of knowledge workers: 36%

Venture capital funding: $5.5B

Boston and Cambridge are experiencing an influx of life science and major tech companies. Boston’s central business district has among the highest life science rents at about $75/SF. Demand to supply is 4:1 and demand is high for blocks of space over 100K SF.

Tech companies are seizing large chunks of space in Boston as well. GE broke ground on its new $200M 400K SF headquarters within the Fort Point neighborhood in May. It will be moving from Fairfield, Connecticut, to Boston. Startup Toast will expand its headquarters in Fenway, and Amazon is in talks for a 150K SF office off Summer Street.

5. Raleigh/Durham/Chapel Hill

Number of prominent educational institutions: Six

Percentage of tech workers: 11%

Percentage of knowledge workers: 26%

Venture capital funding: $500M

North Carolina’s Raleigh/Durham region has benefited from innovation clusters near Duke University and a burgeoning life science sector. Several redevelopments in Durham, including The Chesterfield, will help meet new demand for life science, according to JLL. Durham’s American Underground, the former home of the American Tobacco Campus, houses more than 200 startups. Class-A vacancy rate is near a record low of 1.1% in downtown Durham, and overall asking rents have risen 15.8% since 2015.

6. Seattle

Number of prominent educational institutions: Three

Percentage of tech workers: 9%

Percentage of knowledge workers: 26%

Venture capital funding: About $1B

Seattle is drawing more talent out of the San Francisco Bay Area than any other metro area. Seattle’s tech market started with Microsoft years ago and now Amazon has gained a significant presence in the downtown region, according to Cushman & Wakefield Regional Director, Northwest U.S. Research Robert Sammons, who co-authored the firm's tech report. Google also has expanded into Seattle. The cost of living and mass transit challenges have pushed many tech companies to consider a move to Seattle.

While Seattle is still playing a bit of catch-up, housing is outpacing the Bay Area and a $54B transportation initiative recently passed by voters will put the Pacific Northwest city in a position to more aggressively compete with the top markets on this list, Sammons said.

7. Austin

Number of prominent educational institutions: Five

Percentage of tech workers: 9.5%

Percentage of knowledge workers: 23%

Venture capital funding: About $1B

Austin is fast becoming a startup hub in the Southwest, and the Kauffman Index ranks Austin as the second-fastest growing city after D.C. Startups average an 81.2% growth rate after the first five years in operation. The city also attracts tech heavyweights: Google is leasing 200K SF of a 500K SF tower in Austin. eBay recently renewed a 214K SF lease at Accesso Partners’ 129-acre tech office park, which houses Oracle, Google, PayPal, Electronic Arts and Polycom.