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 this year, buoyed by the city’s growth in tech employment and office lease rates, according to CBRE’s annual Tech-30 report.

Charlotte ranked fifth in high-tech job growth with a 21.3% increase in tech jobs in 2021 and 2022, more than double the national growth rate of 10.1%. Tech job growth helped propel the market to the seventeenth-largest office-rent gain (4.5%). Charlotte also ranked 11th in net absorption growth, which fell to -1% between Q3 2021 and Q2 2023, down from its 0% net absorption between Q3 2020 and Q2 2022. Net absorption, a proxy for office demand measures the net amount of space newly occupied against that newly vacated.

“Once again, results from CBRE’s Tech-30 report confirm that Charlotte’s growth rate in the tech sector continues to solidify our market as a technology-forward city nationally,” said Joe Franco, a Senior Vice President in CBRE’s Charlotte office. “Most notably, many of our rapidly growing Charlotte-based tech tenants are requiring their employees to be in the office five days a week. With both tech-sector growth and utilization trending up in our market, these fundamentals will continue to fuel overall demand and absorption in Charlotte going into 2024.”

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.

Nationally, 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.

“Tech-office leasing has steadily increased this year across the U.S., but short-term momentum could shift along with the economy. To be sure, long-term growth prospects of the tech industry remain strong with ample capital to fund innovation,” said Colin Yasukochi, executive director of CBRE’s Tech Insights Center in San Francisco. “Investment in emerging technologies like artificial intelligence can produce significant economic value, employment and office space demand. The impact of AI on business growth has the potential to reach the same scale as the mobile internet, which would result in significant demand in the Tech-30 markets.”

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.

Charlotte’s tech workforce of 33,985 people amounts to 11.9% of all office-using positions in the market. Another growth driver: Tech companies claimed more than 59% of the $153.1 million in venture capital funding awarded to Charlotte companies in this year’s first half.

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%).

To read the Tech-30 report, click here.