It is no secret that Phoenix is seeing a vast growth of technology companies. According to an article recently published by Forbes Magazine, “Arizona has more than 7,600 high-tech companies already operating within the state.” And according to the Arizona Commerce Authority, 54 out of every 1,000 private sector workers are employed by a high-tech firm with the average high-tech wage almost 2.5 times greater than the average wage in Arizona.
So how is this growth changing the real estate landscape? Our local tech expert, JLL associate Trevor Pratt, summarizes the big trends he is seeing after working with companies like OutboundEngine, FATHOM, Beyond Trust, Wayside Technology Group and SigFig.
The popular rise of the Loop 101
Technology-focused tenants have helped popularize several submarkets along the Loop 101 highway in the Northeast and Southeast as these companies look to locate in areas that offer a large amount of surrounding amenities. Since there is a lot of competition between tech companies, there is large emphasis on having the right space in the right location to positively impact employee retention. The younger employees of these companies desire restaurants, bars, gyms, retail and other attractions near the office, preferably within walking distance.
Despite a market-wide vacancy rate of 22.3 percent, the Central Scottsdale, South Scottsdale, Tempe, and South Tempe/Ahwatukee submarkets have reached a combined vacancy rate of 13.0 percent, partly due to the expanding footprints of tech tenants.
The desire for open office space
Original, creative and innovative office space is a trend spreading throughout all type of industries but the tech industry has, by far, led this. It is important for employees of these companies to feel comfortable and excited to come to work each day so companies are willing to invest in cool build-outs. In-office amenities such as an open space concept, fully-stocked break rooms and designated areas to collaborate all boost employee morale and make an office a fun environment.
The need for flexible expansion options
Many tech companies start very small and grow rapidly. Therefore, locating in space that provides opportunity for growth is a crucial requirement. It is much more cost effective to plan for growth up-front and build flexible expansion options into a lease rather than relocating and subleasing or negotiating expansion in the middle of a lease term. We’re seeing tech tenants sign shorter, three-year leases so they can test labor markets, monitor growth and plan accordingly. Landlords who want tech tenants in their buildings need to be aware of this requirement and willing to work with companies who may be small now but grow into large amounts of space.
If you’re a tech company looking to find your next office space, contact:
+1 602 282 6311