Chapter 7
How does Tech Talent impact commercial real estate?
Scoring Tech Talent 2024
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Since 2020, U.S. tech talent growth, primarily in the high-tech industry, totaled 823,000 jobs and has been the top driver of U.S. office leasing activity.
Recent economic uncertainty and layoffs caused a decline in the high-tech industry’s share of total U.S. office leasing activity5 between 2022 and mid-2023. While there has been a rebound since that time, high-tech industry office leasing remains well below pre-pandemic levels.
Prior to the pandemic, many tech talent markets, especially those with high concentrations or clusters of tech companies, had seen rising rents and declining vacancy rates. But since early 2020, all but five markets have seen office vacancy rates increase, with the highest Q4 2023 vacancy rate in Hartford (29%). Compared with pre-pandemic Q1 2020, rents in the San Francisco Bay Area and New York were 10% and 3% lower, respectively, in Q4 2023. Austin, the Waterloo Region, Dallas-Ft. Worth, South Florida, Tampa and Vancouver had rent growth of 20% or more over the same period.
Tech talent continues to impact office markets through work-from-home and return-to-office policies. As hybrid work arrangements become more common, tech employers have been reconsidering their office space strategy. While many have downsized, others have maintained their portfolio size to accommodate large team meetings and ensure that there is sufficient space for collaboration.
Figure 35: Office Asking Rent by Market (Q4 2023)
* New York represents Manhattan only, all others are metro area.
5 Includes leases of 10,000 sq. ft. or more 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 rents have increased in every market except the San Francisco Bay Area since 2018. Manhattan was the most expensive last year with an average monthly rent of $3,645 (Figure 36). All but one market has seen average apartment rents recover to pre-pandemic levels, led by Tampa with 35% rent growth from Q1 2020 to Q4 2023. Comparing the annual average apartment rent with the annual average tech-worker salary shows that tech salaries generally can cover the cost of living in most of the priciest markets (Figure 37), based on the affordability standard of 30% of income to housing.
The pandemic has fundamentally changed real estate market dynamics across North America. How we use office space in the future and where we choose to live is unlikely to revert to pre-pandemic patterns. Technology’s importance in society and to real estate utilization has been accelerated and disrupted. This will create new opportunities for both real estate occupiers and investors in tech talent markets.
Figure 36: Average Monthly Apartment Rent by Market (Q4 2023)
* New York represents Manhattan only, all others are metro area. **2018 to 2023.
Figure 37: Ratio of Apartment Rent to Average Tech Wage by Market (US$)
* New York represents Manhattan only, all others are metro area.
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