Austin, TX

Austin’s Job and Office Rent Growth Places It Second Among North America’s 30 Hottest Tech Hubs

Austin is only one of three leading tech markets to experience double digit office rent growth since mid-2021

November 2, 2023

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Austin ranks among the most active tech markets in North America for office leasing activity, rent growth and high-tech job growth this year, according to CBRE’s annual Tech-30 report.

Austin’s 26.1% growth in tech jobs in 2021 and 2022 helped land the city in second place in net absorption (4%) among Tech-30 markets and the second-largest office-rent gain (15%). Northwest Austin, the city’s premier tech submarket, ranked third among Tech-30 submarkets in rent growth (15%) and was one of 13 leading tech submarkets to record positive net absorption. Net absorption, a proxy for office demand measures the net amount of space newly occupied against that newly vacated.

“Despite certain challenges in today’s office market, Austin remains a top destination for tech talent, tech companies, and venture capital dollars,” said Nate Stricklen, Executive Vice President with CBRE in Austin. “During the last downturn, we saw a number of companies plant flags and test out Austin for the first time, eventually growing their operations here. I could see a similar thing happen over the next year or two.”

The report, now in its 12th year, measures the tech industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada, as well as select tech-heavy submarkets.

Tech’s share of total office leasing activity has increased each quarter this year, even amid reduced U.S. office leasing activity overall. In Q3 2023, the tech industry reclaimed its position as the top sector in office leasing activity after losing its lead in Q1 2022. Tech’s share of office leasing was 16.5% (7.3 million sq. ft.) in Q3 2023, up from a 10-year low of 9.3% (3.9 million sq. ft.) in Q4 2022. Tech moved back ahead of the finance and insurance sector, which claimed a 15% share of Q3 office leasing activity.

The report features a new analysis of the correlation between venture capital (VC) funding and leasing activity by AI companies. The top five U.S. markets to receive VC funding across all sectors between H1 2019 and H1 2023 (San Francisco, Silicon Valley, New York, Boston and Los Angeles/Orange County) also have the highest amount of office leasing activity by AI companies in that timeframe, according to CBRE’s analysis of its office leasing and CB Insights data.

Since 2019, AI companies have leased 7.5 million sq. ft. of office space across the top five markets. San Francisco and Silicon Valley were the most active markets for AI leasing by volume, each with over 2 million sq. ft. leased.

Total U.S. tech industry employment remains well above pre-pandemic levels, even though tech software and services employment growth decelerated to 0.4% in H1 2023 from 3% in H2 2022. September 2023 marked the fewest tech industry layoffs since June 2022, according to CBRE’s analysis of data from job search firm Challenger, Gray & Christmas.

Austin tech workforce of 81,977 people amounts to 22.2% of all office-using positions in the city. Another growth driver: Tech companies claimed nearly 70% of the $1.7 billion in venture capital funding awarded to Austin companies during the first half of 2023.

Submarket Performance

Leading tech submarkets, which often are located near universities or major tech employers, typically feature higher rents, lower vacancy and high-quality office space than their cities. CBRE found that office rental rates in leading tech submarkets carried a 10.2% premium in Q2 2023, compared with rents for their cities as a whole. Those with the largest premiums are Boston’s East Cambridge (107%), Silicon Valley’s Palo Alto (57%), Pittsburgh’s Oakland/East End (52%), Santa Monica (52%) and Philadelphia’s University City (47%).

Top Tech-30 Submarkets For Office-Rent Gains

Submarket Two-Year Submarket Rent Growth*
Downtown West (Toronto) 21%
River North (Chicago) 17%
Northwest (Austin) 15%
Tempe (Phoenix) 14%
Sorrento Mesa (San Diego) 14%
Far North (Dallas/Ft. Worth) 13%
Central Business District (Nashville) 13%
Lake Union (Seattle) 11%
RTP/I-40 Corridor (Raleigh-Durham) 9%
University City (Philadelphia) 8%

*Q2 2021 VS. Q2 2023

To read the Tech-30 report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.