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Office rental crisis? Not in these hot tech markets

Office rental crisis? Not in these hot tech markets


Office rental crisis? Not in these hot tech markets

Post-COVID offices: Wider hallways, fewer desksThe coronavirus already changed the way we work. Now it’s changing the physical space, too (June 28)APAfter aggressively reducing its appetite for new office space during the pandemic, the tech industry has caught up to 2019 leasing activity levels, according to a soon-to-be released CBRE report that was shared exclusively with USA TODAY.Tech companies are now leasing 22% of U.S. office space, after scaling back to 17% in 2020. And two-thirds of tech markets are experiencing rental gains over 2019. The industry experienced pandemic-related business growth in areas like e-commerce, streaming and cloud services, search and social media. It added 219,000 jobs by June 2021.Total high-tech employment reached 3.9 million that month, 3.3% above its pre-pandemic high, fueled by demand for tech products and service. It is surpassed only by the life sciences industry.The growth is adding to a rebound in U.S. office-leasing activity in 2021, according to the report.Three markets achieved double-digit office rent gains over 2019 rates. Seattle topped the list with a 15% increase over 2019 rental rates.Millennials are flooding the housing market. But what are they buying? That depends.’I am living in a nightmare every day’: What homeowners need to know as climate changeWhile many tech companies are embracing hybrid-work formats to provide their employees flexibility, the increased leasing activity demonstrates the industry “also values the collaborative environment of the physical office and its role in bringing employees together to foster innovation,” says Colin Yasukochi, executive director of CBRE’s Tech Insights Center.Here are the top 10 tech markets that surpassed 2019 rental rates:(CBRE’s Yasukochi explains why)SeattleIncrease since 2019: 15%: Why: Acceleration of e-commerce use and work productivity software tools have created new demand for office space in the region, especially in the Bellevue, Washington, area.CharlotteIncrease since 2019: 11.2%: Why: Expansion of fin-tech firms and financial services sector from higher-cost locations.AustinIncrease since 2019: 11%Why: Tech firms continue to grow and relocate from out of state to be closer to the high-tech manufacturing supply chain, established tech workforce and supply of new graduates.DenverIncrease since 2019: 9%:Why: The young, educated workforce that enjoys Denver’s work-life balance and quality of life continues to attract other tech employers.PhoenixIncrease over 2019: 8.3%Why: Tech firms relocating to the market seek highly sought-after areas that are close to tech talent.Los AngelesIncrease over 2019: 7.4%: Why: Tech continues to go “Hollywood” with streaming content.  And there’s demand for tech talent adjacent to the media and entertainment industries, and that is driving demand for office and studio space.St. LouisIncrease over 2019: 6.2%Why: With a foundation in aerospace and science, many tech startups and more mature tech firms are attracted to the talent and low business and real estate costs.NashvilleIncrease over 2019: 6%Why: The Music City’s lifestyle and creative ecosystem continue to attract tech firms with longer-term expansion plans.Raleigh-DurhamIncrease over 2019: 6%Why: Tech and life sciences thrive in this innovative and academic environment.Salt Lake CityIncrease over 2019: 6%Why: The highly educated and innovative workforce has produced many tech startups and entrepreneurs. Existing tech firms are growing, and new ones are moving in or being created, increasing demand for talent and office space.Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal

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