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

Nashville 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.

Nashville remains one of the most attractive markets for tech companies with a 17.1% growth in tech jobs in 2021 and 2022. Nashville was also the leader in net absorption (5%) among Tech-30 markets and had the seventh-largest office-rent gain (7.7%). Nashville’s Central Business District, the city’s premier tech submarket, ranked first among Tech-30 submarkets in net-absorption gains (9%) and seventh in office-rent growth (13%). Net absorption, a proxy for office demand measures the net amount of space newly occupied against that newly vacated.

“Nashville’s business-friendly climate and strong labor market has continued to make the city an attractive place for tech companies and talent alike,” said David Gossett, Vice President at CBRE in Nashville. “As tech grows its presence, bringing STEM-related jobs to the market, Nashville’s positive fundamentals make it well-positioned to continue to be a hub for tech innovation and growth for years to come, solidifying its prominence among Tech-30 markets.”

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.

“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.

Nashville’s tech workforce of 21,105 people amounts to 9.2% of all office-using positions in the city. Another growth driver: Tech companies claimed nearly 90% of the $573.7 million in venture capital funding awarded to Nashville 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%).

Top Tech-30 Submarkets For Office-Rent Gains

*Q2 2021 VS. Q2 2023

To read the Tech-30 report, click here.