Charlotte’s Tech Job Growth Puts City’s Office Market Among the Hottest of North America’s 30 Leading Tech Hubs

Charlotte ranks among the most active tech markets in North America for office leasing activity in this year’s first half, buoyed by the city’s growth in both tech employment and office lease rates, according to CBRE’s annual Tech-30 report.

Charlotte’s 12.1 percent growth in tech jobs in 2020 and 2021 (up more than 3 percent from the previous 2018 and 2019 period) helped propel the city to the 12th-largest office-rent gain (5.8 percent) and to rank seventh in net absorption (roughly flat). Net absorption, a proxy for office demand measures the net amount of space newly occupied against that newly vacated.

The Northeast Charlotte submarket ranked eighth among Tech-30 submarkets in office-rent growth (11 percent) and ninth in net absorption (flat) over the past two years. Charlotte’s tech workforce of 29,848 people amounts to 11.2 percent of all office-using positions in the city.

“We’ve seen a steep rise in job growth data and overall tech demand in Charlotte’s early stages of market evolution over the past several years,” said Joe Franco, Senior Vice President at CBRE. “As Charlotte settles into its stride as a premier tech hub, the growth with continue to be modest, but nonetheless managing to trend consistently upward.”

The 11th annual edition of CBRE’s Tech-30 report outlines how the tech industry’s share of U.S. office-leasing activity slipped in the first half of this year into a tie with two other major industries, underscoring that the tech industry’s often-unmatched impact on the office market has receded a bit this year.

Still, tech is tied with Finance & Insurance and with Professional & Business Services for the largest share of office leasing activity in this year’s first half at roughly 16 percent apiece. For tech, that’s a decrease from a leading 21 percent share in 2021. The last time tech’s share was lower than its current level was 2017, when it was 17 percent. Much of the industry’s reduced momentum this year can be attributed to a pullback in leasing this year by large tech companies.

The Tech-30 report 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 select tech-heavy submarkets. CBRE’s analysis found that, over the past two years, more than two thirds of the top 30 North American tech markets registered office-rent growth. Seven of those increased by double-digit percentages.

In that span, several tech markets registered positive net absorption, meaning companies in those markets moved into more space than they vacated. Six Tech-30 markets exceeded that threshold: Silicon Valley, Raleigh-Durham, Nashville, Vancouver, Austin and Salt Lake City. So did seven tech submarkets: Nashville’s Central Business District, Vancouver’s Broadway Corridor, Portland suburb Hillsboro, Raleigh-Durham’s RTP/I-40 Corridor, Oakland/East End in Pittsburgh, Salt Lake City’s South Valley, and Midtown Atlanta.

Meanwhile, U.S. tech job growth slowed to a 2.1 percent year-over-year gain in this year’s first half from a 4.5 percent pace in last year’s second half. Hiring momentum persists in many markets, including a dozen top U.S. and Canadian tech hubs that registered double-digit percentage gains in tech employment in 2020 and 2021, led by Vancouver, Toronto, Austin, Seattle and Montreal.

Sublease Space Rises Nationally

Office space available for sublease in the Tech-30 markets increased 4.9 percent to 142 million sq. ft. in this year’s second quarter from a year earlier, the highest total since CBRE started tracking the figures in 2012. Tech companies account for 20 percent of that total. Leases on nearly half of that tech-industry sublease space are scheduled to expire by 2025, reverting to the building owners.

Submarkets Outperform

Leading tech submarkets, which often are located near universities, often feature rising rents, scant vacancy and high-quality office space. CBRE has found that office lease rates in leading tech submarkets carry a 10.5 percent premium, on average, to rates for their cities as a whole as of this year’s second quarter. Those with the largest premiums are East Cambridge in Boston (87 percent), Santa Monica near Los Angeles (59 percent), Philadelphia’s University City (56 percent) and Palo Alto in Silicon Valley (50 percent). Tech submarkets also tend to generate some of the strongest rent gains in their cities.

Similarly, several tech submarkets have notched double-digit percentage increases in office rent since 2020.

Top Tech-30 Submarkets For Office-Rent Gains

*Q2 2022 vs. Q2 2020

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 include Vancouver, Silicon Valley, San Diego, Boston and Raleigh-Durham.

To read the Tech-30 report, click here.