Tech Insights: Growing Tech Industry Leads U.S. Office Leasing Rebound

After curtailing their expansion during the first year of the pandemic, tech companies became more active in 2021, accounting for 21% of total leasing activity, up from 17% in 2020 and 20% in 2019. Total leasing activity, which includes both new leases and renewals, for the year was up 50% for tech companies and 27% across all sectors.

The volume of new large-block transactions is a key indicator of growth trends and confidence to make lease commitments. These 100,000-plus-sq.-ft. transactions tend to be market-moving and involve tenants opening a new location. Renewals, which are excluded from the following analysis, typically rise during uncertain times and less often involve a change in the amount of space leased.

Tech companies completed 65 new large-block transactions totaling 13.8 million sq. ft. in 2021, 53% more than the 9.1 million sq. ft. leased in 2020. Social media companies were the most active in 2021, accounting for 24% of new large-block leases by square footage, followed by e-commerce (22%) and software (21%) companies.

Figure 1: U.S. Large Block New Leasing Activity by Tech Industry

(100,000-plus-sq.-ft. new direct/sublease deals, renewals excluded)

Source: CBRE Research, February 2022.

Five markets—Silicon Valley, Boston, Seattle, Austin and the San Francisco Peninsula—exceeded one million sq. ft. leased in 2021, accounting for 57% of the new large-block tech leasing volume. Four markets at least tripled their leasing volume in 2021: the San Francisco Peninsula, Silicon Valley, Los Angeles and Boston. Overall, leasing activity in all but two markets remained below pre-pandemic (2018-2019) levels. For the 2020-2021 period, Atlanta and Seattle exceeded pre-pandemic leasing totals by 180% and 15%, respectively, suggesting significant occupancy growth.

Many tech companies have seen their business increase during the pandemic, causing them to add staff. This growth, combined with 2020’s COVID-suppressed activity levels, has led to pent-up demand, which is starting to be filled, despite hybrid work plans that will bring fewer people into the office each day.

Figure 2: U.S. Tech Industry Large Block Leasing Activity by Market

(100,000-plus-sq.-ft. new direct/sublease deals, renewals excluded)

Source: CBRE Research, February 2022.