Everyone knows the current technology hubs, dominated by the San Francisco area and cities gateway cities including New York and Boston. But as technology firms’ office rents in these regions inch close to $100 per sq. ft., tenants are searching for emerging markets that offer an educated talent pool coupled with lower real estate costs.
Tech firms are looking to move into new markets out of strategic necessity, according to a new study by commercial real estate services firm JLL. In the past year, 34 technology companies expanded into new locations across 19 markets, accounting for more than 2.1 million sq. ft. of space. Rising rents are also forcing start-ups to find cities to launch their own mini-Silicon Valley corridors, says Amber Schiada, director of research for JLL’s northern California and Rocky Mountain region.
“For the occupiers, they don’t want to be in the markets where there are the highest rents and wages in the country,” she says. “It’s about having access to a good talent pool and available capital, but if [they] can get lower real estate costs, that helps the bottom line.”
Property owners and investors looking for the “sweet spot” for emerging tech office markets must consider factors including employment and wage growth, depth of talent, innovation, amount of local start-up firms and access to venture capital, as well as the average cost of office rents and housing. The possible new markets vary when considering these factors, but Schiada says there are five areas that stand out as having the best mix of these features, with impressive talent pools, access to capital and low cost of real estate.