CBRE Names Nashville as One of Six Markets to Post Gains in Office Net Absorption since 2019
November 4, 2021
The tech industry led a rebound in U.S. office-leasing activity in 2021, fueled by increased hiring and demand for tech products and services, according to CBRE’s annual Tech-30 report. Tech companies claimed a 22 percent share of U.S. office-leasing activity in the second and third quarters combined, up from 17 percent for all of 2020.
Nashville ranked third in net absorption growth – the net amount of office space newly occupied or vacated - with a 2.4 percent gain since mid-2019. The city was one of only six markets to post gains. Additionally, Nashville posted a six percent gain in office rents in the same period.
The Tech-30 report also examines leading tech submarkets within the Tech-30 cities. Nashville’s Central Business District ranked eleventh among submarkets in the Tech-30 in rent growth over a two-year period from the second quarter of 2019 to the second quarter of 2021. The CBD was also one of 12 submarkets to post positive net absorption in that timeframe.
“Nashville continues its rapid growth within the tech sector,” said Stephen Kulinski, managing director at CBRE. “The fact that Nashville remains in the top twenty fastest growing tech cities in the U.S., in spite of the pandemic, is an indication that the middle Tennessee economy will remain strong for some time.”
CBRE’s Tech-30 report, now in its 10th year, measures the industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada, as well as certain tech-heavy submarkets. This year, tech companies’ office leasing activity increased by 122 percent on average in the second and third quarters, compared to the first. In addition, more than two thirds of the top 30 North American tech markets registered office-rent growth from the second quarter of 2019.
Over this two-year period, four markets posted double-digit percentage gains in office rents: Seattle, Charlotte, Vancouver and Austin.
The gains in tech’s office leasing underscore the industry’s resilience during the pandemic. U.S. tech employment now exceeds its precrisis level by 3.3 percent, surpassed only by the life sciences industry (6.9 percent). The tech industry expanded by 219,000 jobs in the U.S. since May 2020. The top Tech-30 markets for tech-job growth in 2019 to 2020 are Toronto (a gain of 26 percent), Seattle (22 percent), Vancouver (21 percent), New York (18 percent) and Austin (16 percent).
Yet the tech industry still poses a challenge for office markets in one regard: sublease space. Office space listed for sublease by tech companies in the Tech-30 markets nearly doubled from last year’s first quarter to this year’s third, now totaling 134 million sq. ft. Tech companies currently account for 23 percent of all office space listed for sublease in those markets, up from 14 percent in 2019. Still, indicators of leasing activity show that the U.S. total of sublease space likely peaked last quarter.
Among the most resilient office markets in this downturn are leading tech submarkets, which often are located near universities. CBRE has found that office lease rates in leading tech submarkets carry a 23 percent premium, on average, to rates for their cities as a whole. Those with the largest premiums are East Cambridge in Boston (114 percent), Palo Alto in Silicon Valley (66 percent) and Santa Monica in Southern California (63 percent). Tech submarkets also tend to generate some of the strongest rent gains and office-space absorption in their cities.
CBRE’s report also identifies markets well positioned for resiliency and continued growth based on tech job growth and momentum, office market performance and demand recovery. Those are Charlotte, Montreal, New York, Phoenix, Pittsburgh, Raleigh-Durham, Seattle, Silicon Valley, Toronto and Vancouver.
To read the Tech-30 report, click here.
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 2021 revenue). The company has more than 105,000 employees (excluding 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.