Tech Growth Fuels Demand in Office Sector: Here’s Why
The tech job growth continues to increase the demand for the office sector. There are various reasons why this is happening. Growth in technology-related jobs is expected to keep office leasing strong in certain markets over the next 10 years. Here is why.
Office Leasing is Directly Related to Tech Jobs
According to Cushman & Wakefield’s Occupier Insights Report, between 20 and 25 percent of current office leasing activity is related to technology jobs, particularly computer and math occupations – a subset of STEM. Previous office leasing had been driven by banking and financial services, but now tech is the true driver of leasing in the office sector.
In total, 2 million new computer and mathematics occupations have been created over the past seven years, bringing the total amount of mathematics jobs to 167,000 and the total amount of computing jobs to 4.1 million in the United States. STEM jobs are being created quicker than other jobs with seven of the top 10 STEM occupations being computer-related and including jobs such as developers, designers, and programmers. Of these new jobs, 85.4 percent are in office-using industries, which establishes it as the largest occupational category driving growth in the office cycle’s current expansion, according to the Cushman & Wakefield report.
According to CBRE’s Scoring Tech Talent report, which ranks 50 U.S. markets according to their ability to attract and grow tech talent, tech talent is a growing driver of demand for office space in both large and small markets across the country. CBRE research showed that tech talent growth rates are the best indicator of the labor pool momentum and it’s easily quantifiable to identify the markets where demand for tech workers has surged. Tech talent growth, primarily within the high-tech industry, has recently been the top driver of office leasing activity in the U.S.
Occupations are Branching Out
Computer and math occupations are no longer limited to traditional technology firms and are now branching out to all office-using industries, which has only made the competition fiercer for this type of talent and is encouraging employers to locate in markets that attract these young, educated tech talent workers.
According to a recent projection by the U.S. Bureau of Labor Statistics, professional and technical services industries are projected to add more than four times the amount of jobs information technology companies are expected to.
Employers are Moving to Cities that Offer a Large Tech Talent Pool
Employers are flocking to cities that have a built-in tech talent pool. These businesses are setting up shop in both small and large markets that have government investment, firms, and universities. Tech firms are now locating in central business districts, urbanized and suburban submarkets.
The Bottom Line
Office space is expected to continue seeing positive demand through the next decade in hot tech markets, but the market is currently seeing the strongest new construction cycle, which is projected to increased vacancy and place pressure on effective rents in particular markets. Because the unemployment rate is so low, employers will also have to look to other firms to take the talent from and leverage amenities and locations with an exciting vibe that will lure these talented tech workers to their company.