Bay Area Reigns Supreme For Tech Talent, But Other Markets Are Inching Toward Prominence
The San Francisco Bay Area remains the premier region in the U.S. for tech talent, even though the cost of living and office rents continue to rise, according to CBRE’s 2018 Scoring Tech Talent report. Office markets with strong tech employment have been among those to experience high office demand, rapid leasing activity, significant office rent growth and apartment rents.
While the Bay Area remains top dog for tech talent, Seattle, Washington, D.C., Toronto and New York City rounded out the top five. This is the first year a Canadian city has reached the top five in CBRE’s report. Toronto actually outranked the Bay Area in terms of tech job growth, adding over 82,000 jobs compared to over 77,000 in the Bay Area over the last five years.
CBRE’s Tech Talent Scorecard evaluates 13 metrics, such as tech talent supply, growth, concentration, cost, completed tech degrees, industry outlook for job growth and market outlook for both office and apartment rent cost growth.
The number of tech workers has risen 16% over the last five years reaching nearly 6 million workers in U.S. and Canada. With the addition of 682,000 jobs, the tech industry is adding jobs three times the U.S. national average job growth.
With the addition of tens of thousand of workers, office rents have risen to their highest levels in some markets and pushed down vacancy to among their lowest levels.
The share of major leases from tech companies increased to 20% during the first quarter, compared to 11% in 2011, according to CBRE. Tech currently holds the largest share of leasing activity of any industry nationwide.
Outside of the top large metros, other markets have been experiencing an influx of tech talent, especially as costs rise in prominent tech markets. Additionally, tightening labor markets and strong economic conditions are constraining job growth, CBRE San Francisco Bay Area Director of Research and Analysis Colin Yasukochi said in a statement.
“This has accelerated the expansion of tech talent pools across the U.S. to meet this demand, with increased numbers of tech degree graduates,” Yasukochi said. “Accordingly, demand for commercial real estate in large and previously under-utilized regions is on the rise from both start-ups and established companies.”
The top 10 small tech markets have grown over 10%, with Charlotte growing 59%, the fastest of all 50 markets in CBRE’s report. The population of millennials also has grown quickly in small markets, with growth of 12.5% and 12.1% in San Antonio, Texas, and Madison, Wisconsin, respectively. Madison, in particular, has benefited from the presence of prominent universities.
Comparatively, Seattle’s millennial population grew 22.7%, the fastest of any tech talent market.
Why The Bay Area Is Top Dog
Despite other markets experiencing growth in the tech industry, the current trajectory in the Bay Area remains unmatched. After a few quarters of stagnation, San Francisco’s office market reached historic high rent levels at over $75/SF during the second quarter. Office rents in the Bay Area and Orange County, which ranked as the 19th top tech market, are now 50% higher than they were five years ago, according to CBRE.
In the Bay Area, momentum for tech leasing doesn’t appear to be slowing down, even though future office deliveries are expected to taper off in the next three years.
“The San Francisco Bay Area attracts the brightest and best minds in the tech industry,” CBRE Vice Chairman Jenny Haeg said in a statement. “People come here to innovate. That’s why, despite how expensive it is to do business here, companies continue to expand their footprints in the Bay Area.”
In the last 12 months, the tech industry has leased 25M SF of Bay Area office, according to CBRE. This includes two large deals from Facebook that involved taking the entire 436K SF of office space at 181 Fremont and a 755K SF office at Park Tower at Transbay, which is currently the largest lease in San Francisco’s history.
Dropbox, Uber, Salesforce, Amazon and Google are among the tech companies to lease large blocks of space in recent quarters in San Francisco. The Bay Area has a tech talent labor pool of 329,150, which is about 9.8% of the region’s total employment and about double the national average of 3.5%.
The Bay Area remains prominent for tech talent due to its ability to offer the highest compensation and the most job opportunities. The region added 78,000 new tech workers over the last five years, a 31% increase.
During the last five years, the region produced 6,300 tech degrees and imported 47,000 new workers to meet the region’s demand. The Bay Area also has the highest quality of tech talent, which CBRE measures by the number and concentration of software engineers with three or more years of experience and degrees from the top 25 computer science programs in North America.
Check out how the Bay Area stacks up against the rest of the top five tech talent hubs below:
Total Score: 84.72
Employment Growth 2012 to 2017: 31%
Average Tech Wage: $125K
Apartment Rent: $2,892 (up 30% since 2013)
Office Rent: $62.73
Office Vacancy: 8.1%
Total Score: 74.46
Employment Growth 2012 to 2017: 19.4%
Average Tech Wage: $117K
Apartment Rent: $1,713 (up 29% since 2013)
Office Rent: $34.17
Total Score: 67.7
Employment Growth 2012 to 2017: -1.3%
Average Tech Wage: $111K
Apartment Rent: $1,720 (up 4% since 2013)
Office Rent: $39.73
Total Score: 65.38
Employment Growth 2012 to 2017: 51.5%
Average Tech Wage: $83K
Apartment Rent: $1,300 (up 18% since 2013)
Office Rent: $34.49
Total Score: 64.04
Employment Growth 2012 to 2017: 17.2%
Average Tech Wage: $112K
Apartment Rent: $4,042 (up 4% since 2013)
Office Rent: $74.88