It’s not just Silicon Valley that forms the nucleus of the U.S. high-tech growth economy, but hubs such as Atlanta and Chicago are emerging thanks to the burgeoning high-tech start-up culture. Jones Lang LaSalle’s (JLL) national ranking of top cities for high-tech companies shows the impact of the evolving start-up culture on office demand, traditional workplace environments, and regional economies.
“High-tech industry growth has outpaced the national economy by an average of four to one since 2010,” explains Amber Schiada, Research Manager, Jones Lang LaSalle. “This economic contribution is driven by start-ups, many located in high-tech incubators offering office space, but also access to professional services, collaboration, and venture capital opportunities.”
Venture capital investment trends back this up. The VC sector remains confident in high-tech, making it the highest-funded industry across the U.S., capturing 60.8 percent of total funding between the third quarter of 2012 and second quarter of 2013.
“High-tech start-ups – powered by significant VC funding -- continue to spread to promising new cities in an effort to tap the highly-skilled talent pools in those regions,” said Julia Georgules, Research Manager, Jones Lang LaSalle.
New centers of innovation: top tech markets
For every new innovation job created in a community, five additional jobs are created in the same metropolitan area. With high-tech incubators providing centers for these clusters to thrive, an increasing number of U.S. cities are relying on the high-tech sector for economic growth. In fact, the sector has not only stimulated real estate recovery and expansion, but it is also helping drive new construction. The top 12 markets tracked in JLL’s report account for almost 50 percent, more than 23 million square feet of new construction.
JLL’s index (see table) rates each city on four primary factors: high-tech employment; share of U.S. venture capital funding; intellectual capital; and innovation. As a result, the top five markets include longstanding high-technology industry meccas – but then the list gets interesting. New York is just outside the top ten, outranked by emerging clusters in Atlanta, Raleigh-Durham and Denver.
JLL’s 2013 Top High Tech Markets
Market Total Weighted Score
San Francisco 81.2
Silicon Valley 78.7
San Francisco Peninsula 77.0
Seattle (Puget Sound) 66.8
Washington, DC 56.8
New York City (Manhattan) 45.3
New Jersey (State) 44.6
Salt Lake City 43.7
Orange County 33.6
San Diego 31.1
Los Angeles 20.3
Las Vegas 15.7
Cities such as Minneapolis, Indianapolis, and Baltimore are climbing the list rapidly with robust high-tech clusters locating in proximity to highly-skilled labor pools of GenX and Millennial high-tech professionals. The competition for space in core high-tech markets is pushing rents to a premium. Average rents in these markets at the end of the second quarter this year were 11.6 percent higher than the national average at $32.69 per square foot compared to $29.29.
Incubators foster innovation in start-ups and Fortune 1000 companies
Technology incubatorshave become the modern alternative to the suburban garages where Apple, Hewlett Packard, and other high-tech giants began. They have maintained the focus on disruptive technologies and added modern, flexible office space, amenities such as, furniture, networking, training and access to venture capital opportunities.
“We think clustering is essential and believe it is significantly harder to innovate in isolation than when you are surrounded by like-minded entrepreneurs,” explains CEO of high-tech incubator, RocketSpace. “We provide the optimal environment for disruptive technology companies to thrive.”
While RocketSpace continues to focus on high-tech start-ups and entrepreneurs, the incubator has also created a Corporate Innovation Program with Fortune 1000 companies such as a Big Three automaker, a major airline, a top beverage brand, and several technology giants. RocketSpace provides these companies with consulting and research, identifying technology themes and companies. As a result, corporate funding and venture capital opportunities naturally emerge for the start-ups, while the corporations access a deep pool of product and service ideas.
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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit www.jll.com.