From San Francisco to New York and everywhere in between…
The tech industry continues to be the largest consumer of office space across the country.
And not just in the major tech hubs.
As all industries across the spectrum continue to innovate and incorporate new tech into their business models, owners and investors of commercial real estate can confidently ride the tech wave in virtually every market, in every corner of every state.
When tech companies here in Arizona look for new office space, it’s no surprise that most look at Scottsdale and Tempe. The live-work-play concept lures many young professionals many tech companies recruit.
But don’t count Phoenix out just yet! Revitalization, coupled with company expansions, has brought both jobs and the Millennials to the area in force. In fact, the 38,000 square foot leasing of the fintech company, Upgrade, LLC will create 300 jobs in Downtown Phoenix.
As a secondary market, we may be less exposed to tech when compared to the other California tech powerhouses, but with the expectation of more activity in 2018 and beyond, the sector will continue to be an integral component in the local economy.
Unlike the tech industry of the dot-com days, today’s tech companies have many more viable location options to consider. JLL’s newly released Tech Office Trends Report lays out the six top trends that will impact real estate decisions here in [insert local market] and in every other tech cluster nationwide:
- Talent is the target. Competition for the best and the brightest is at an all-time high…and this competitive environment is not expected to change any time soon. Low employment (4.2%), coupled with low labor force participation (63.1%) is a challenge for the economy at large and employers are getting creative with their employee attraction/retention approaches. Because of this, we should expect to see more secondary and tertiary markets benefit from corporate expansions. This should continue to spur tech clustering and allow smaller startups to stay local in the future.
- Cost is irrelevant. Well, that’s not exactly true, and good financial decision-making is key to smart growth. But the future of work is changing, and making good investments in the workplace is becoming more and more critical to a company’s success. So while a nicer office, location and amenities may cost more, what a company will get in return is worth every penny. Through year-end 2017 and into 2018, the real estate environment both domestically and globally for law firms will shift markedly. Tenants will see an increase in space options not present even one year ago and with that will come greater competition between landlords of both new and existing buildings, leading to increasingly higher concession packages eventually flattening and falling rents.
- Reversal of density. From micro apartments to car sharing, to coworking and beyond, the drive toward a “less is more” ownership mentality on a personal and corporate basis has completely transformed the way things work. As a result, the concept of the personal office has been largely eliminated from a technology company’s space design and personal workspace has been reduced from what was once an industry standard of 350 square feet per person during the dot-com days to as low as 50 square feet per person today. Moving forward, companies will be taking a closer look at the optimal space utilization rates.
- Flexible space evolution. How do you attract and retain the best workforce, for the best cost, in the best market? And how can you consider the generational shift and prepare for that as well? Flex office options offer additional options on short notice, without sacrificing culture. Expect to see a blurring of lines between not only traditional coworking centers and the traditional office, but also hotel lobbies, coffee shops, retail banking centers and office common areas to serve as the “third space”.
- Generations matter. The baby boomers caused fundamental changes in our society that no one could deny. Millennials outnumber the boomer generation and the youngest of those are just now graduating high school. As millennials come of age, they will be buying homes. They will be settling down and raising children. It may not look the same as their elders’ generation, but they will need housing and they will want to ease their work-life balance. What should companies be thinking about when considering long-term moves? The suburbs are not dead, and even though we’ve seen a lot of shift toward downtowns across the country, don’t count the suburbs out just yet.
- Cost of living: A top concern. Housing is expensive, especially in markets that have benefited from booming economic conditions thanks to an expanding tech industry. Young professionals are bunking up with multiple roommates, converting living rooms into bedrooms or renting micro apartments. How should you be thinking about this issue? Many a talented tech professional will remain in the top markets, but there are many more that want all of the quality of living without the cost. Since we already mentioned earlier that talent will remain the key target for companies, it’ll also be important to understand where that talent wants to live.
With tech permeating virtually every local economy, the outlook for many metro areas is surely a promising one.
Download our latest report on this year’s tech trends in real estate to learn more.