It’s no secret that the high-tech sector has led the U.S. job recovery and has been the igniter of the ongoing economic recovery. U.S. high-tech services job growth has outperformed total nonfarm employment growth by an average of four to one since January 2010. Innovation hubs such as San Francisco, Seattle, Boston and Austin are boasting healthy unemployment rates, recording higher office property occupancies and rents, and seeing a spate of new construction to meet growing tenant demand. In addition, emerging high-tech markets such as Atlanta, Baltimore and Minneapolis are also benefiting from the high-tech boom.
Several recently published research reports have focused on the positive economic effects of high-tech growth.
A study conducted jointly by the Bay Area Council Economic Institute and Engine Advocacy and titled Technology Works: High-Tech Employment and Wages in the United States determined that for every job created in the high-tech sector, approximately 4.3 jobs are created — via the multiplier effect — in other local goods and services sectors. The report also notes that while California continues to dominate in high-tech jobs, other regions across the nation are benefiting from the high-tech boom, including metros in the Rust Belt and South, which historically have not been associated with high-tech.
And the good news is that this expansion is expected to continue in the coming years as high-tech giants expand their operations and venture capitalist continue to fuel start-up companies. Commercial real estate owners and investors in core high-tech markets and emerging high-tech markets will benefit from this economic stimulus.
In another report, Jones Lang LaSalle’s High Technology Office Outlook states:
“The high-technology manufacturing and services sectors are important drivers of economic growth, especially as the industry produces a strong multiplier effect on the entire economy. Existing high-tech clusters and the emergence of new clusters will drive continued economic growth while also reshaping the commercial office landscape.”
The report notes that office properties in core high-tech markets across the country have outperformed the national averages, recording a 14.2 percent vacancy rate and an average rental rate of $32.69 per square foot at midyear 2013, compared with the averages of 16.9 percent and $29.29 per square foot, respectively.
In addition, the high-tech expansion has stimulated a wave of new office development. JLL notes that the 12 core high-tech markets tracked in its report account for nearly 50 percent of the total U.S. office construction at more than 23 million square feet. Today’s expanding high-tech firms are seeking creative space that utilizes a more efficient and open office plan.
Although the high-tech sector comprises only 3.3 percent of the absolute number of U.S. private jobs, its economic clout is much greater. A fact that likely won’t be lost on property investors or local politicians.
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Larry Gray is editorial director of Institutional Real Estate, Inc.
