Tech Is Critical To Bay Area Economy, Office Market
Not surprisingly to anyone watching area tech companies grab up huge blocks of space and startups filling smaller space and coworking offices, tech is a critical component of San Francisco and Silicon Valley's local economy and commercial real estate market, Cushman & Wakefield said in the company's Tech Cities 2.0 report released Thursday.
But it is not just the Facebooks and Googles that are driving the tech demand.
“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,” Cushman & Wakefield Americas Head of Research Revathi Greenwood said in a statement.
The tech industry has influenced how both companies within the sector and traditionally nontech companies approach their office space, Cushman & Wakefield Senior Director, Northern California Research Robert Sammons said in a statement.
“Both start-ups and big tech companies have recognized they need a footprint in the central cities to keep attracting millennial workers, and as a result, they are taking large chunks of high-rise buildings and trophy assets in dense urban areas — in addition to keeping their sprawling campuses in the suburbs,” he said.
Hence the push into vertical campuses in San Francisco for those big tech companies even as they grow their footprints in Silicon Valley. Many companies either grow up in the area or at least feel it is important to have a Bay Area presence because of the area's tech infrastructure and rich talent pool, Sammons said.
Tech and life sciences companies made up 67.1% of total office leasing activity in Silicon Valley and 64.6% in San Francisco for 2017 through midyear 2018, according to the report. It was 54.7% in the East Bay and 70.3% on the Peninsula. All far outpaced the nation, which had 24.3% of office leasing driven by tech and life sciences.
Big deals included Roku's lease of 472K SF at Coleman Highline in San Jose and Facebook's multiple leases in San Francisco, going from very little space in the city to totaling nearly 1.5M SF in under a year. The report notes that Facebook is San Francisco's fourth-largest private sector tenant. Salesforce has edged out Wells Fargo to become the city's largest private sector tenant.
"Due to its tech prowess, the San Francisco Bay Area has remained front and center of our current longstanding economic growth and expansion, as it had the prior expansion cycles," Sammons said. "Silicon Valley, of course, is thought of as the birthplace of tech and remains a hub for some of the biggest and most influential players in the field. San Francisco, with its startup culture, has seen a number of homegrown companies grow up and also stay here. Combined, there are more jobs at tech companies here than anywhere else in the U.S.”
Sammons cautioned that the same growth that has spurred the local economy has created challenges, including the high cost of living that is driving residents to move out of the area and making it harder to find employees with the necessary skills. Those challenges will drive some employers to look in other markets for growth, though he anticipates continued expansion in the Bay Area, particularly if the high cost of housing and other issues are addressed.
In addition to Silicon Valley and San Francisco, the report found tech was a critical component in Austin, Boston, Provo, Raleigh/Durham, Salt Lake City, San Diego, Seattle and Washington, D.C.
CORRECTION, SEPT. 28, 10:20 A.M. PT: A previous version of the story had the wrong release date for the report. It was released Thursday. The story has been updated.