U.S. tech talent growth, primarily in the high-tech industry, has totaled 631,000 jobs over the past five years and been the top driver of U.S. office leasing activity during that time.

While the high-tech industry’s share of major leasing activity7 nationwide fell to 17% in 2020 from a high of 21% in 2019, it rebounded to 21% in 2021 and accounted for the most activity of any industry. Many tech talent markets, especially those with high concentrations or clusters of tech companies, had seen rising rents and declining vacancies prior to the pandemic. All 50 markets have rents above levels established five years ago and seven markets have lower vacancy rates than in 2016. Compared with pre-pandemic Q1 2020, rents in New York, San Francisco Bay Area and Philadelphia were at least 3% lower in Q4 2021. Austin, Vancouver, Hartford, Houston, Tampa and Waterloo, Canada saw rents grow by 20% or more over the same period.

Tech talent has also impacted office markets through work-from-home and return-to-office policies. A tight labor market has led tech employers to offer more accommodative working arrangements that have slowed the return to office progress across all industries in many tech-concentrated markets. This has generally delayed office market occupancy and rent growth.

Figure 27: Office Asking Rent By Market (Q4 2021)

Note: New York represents Manhattan only, all others are metro area.
Source: CBRE Research (Office Market), Q4 2021..

7 Includes transactions 10,000 sq. ft. or larger each quarter for the 50+ markets tracked by CBRE Research.

The in-migration of talent to these tech markets also has a sizeable impact on residential real estate. Apartment costs have increased in all markets and New York Metro remains the most expensive. Five markets saw average rent increases of 40% or more between 2016 and 2021, led by Phoenix at 59% (Figure 28). Comparing the annual average apartment rent with the annual average tech-worker salary shows that tech salaries generally can cover the cost of living in even the most expensive markets (Figure 29), based on the affordability standard of 30% of income to housing.

Figure 28: Average Monthly Apartment Rent by Market (Q4 2021)

Note: New York represents Manhattan only, all others are metro area.
Source: CBRE Econometric Advisors, Axiometrics, CMHC, Q4 2021.

Figure 29: Tech Wage To Apartment Rent Ratio (US$)

Note: New York represents Manhattan only, all others are metro area.
Source: CBRE Econometric Advisors, Axiometrics, CMHC, Q4 2021.

The pandemic has changed real estate market dynamics across North America. How we use office space going forward and where we choose to live is unlikely to revert to pre-pandemic patterns. Technology’s importance in society and to real estate utilization has been accelerated and disrupted. This will create new opportunities for both real estate occupiers and investors in tech talent markets.

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