Julia Georgules and Phil Ryan: New Year, New Office? NERDS Markets Offer New Opportunities to Harness Innovation, Talent

Silicon Valley and San Francisco are prime locatio...

Silicon Valley and San Francisco are prime locations for tech companies and millennials, but it comes at a premium price: Office space rents are triple the national average in Palo Alto, up 75 percent over the last four years. And employees can expect to pay a hefty $2,700 per month in rent.

So where else can you find the talent and innovative culture needed to help a company grow, without the price tag? The answer: look to expand or relocate in the “NERDS” markets.  Namely, Nashville, East Bay, Raleigh-Durham, Denver and Salt Lake City.

These five markets stand out as having rents and vacancy levels below – but absorption rates above – the national average.

In addition, the NERDS markets have been growing at nearly double the national rate since 2010, according to JLL research. Gross metropolitan product has more than tripled in these areas since 1990, and the job market for tech work is strong. The professional and business services industry in the NERDS markets – which includes jobs in engineering, scientific research, computer systems and the like – has added 41,000 jobs in the last year. That’s generating 31 percent of job growth in these markets.

It’s not just the private sector, either. Universities, which are a critical lynchpin in creating the right tech culture, are there as well – Vanderbilt University, Duke University, the University of California, Berkeley, Brigham Young University and University of Colorado Boulder are among the top-ranked schools that anchor these markets.

Also, the price is right: the cost of living is an average 36 percent less than in San Francisco and 16 percent less than in Austin. Housing in the NERDS markets can cost as much as 75 percent less than near Silicon Valley in some cases.

Each of these cities has its own selling points:

  • Nashville, Tennessee: Outside of its renowned music scene, education, leisure, and healthcare and healthcare-related technology are central to Nashville’s economy. Job growth was 1.6 times faster than the national average last year and unemployment rates have been falling. It’s an attractive spot for expanding or relocating companies, with commercial real estate rates nearly 30 percent lower than the overall U.S. average.
  • East Bay, California: Numerous Fortune 500 companies and a growing number of technology companies call East Bay home. While, geographically, it’s close to San Francisco and Silicon Valley, there is a sea of difference in prices, which are 54 percent less than San Francisco and 30 percent less than Silicon Valley.
  • Raleigh-Durham, North Carolina: Its well-established research triangle between three prominent universities has made the region an education and health powerhouse. Its population is booming, and its college-educated population is double the national average. Incomes are high due to the demand for the area’s skilled tech, science and research workers.
  • Denver, Colorado: Its economy is grounded in energy, life sciences, aerospace and technology, but the lifestyle is what attracts many people. Denver’s population is expected to grow by 19 percent by 2017 and the universities churn out a steady stream of new graduates in a variety of disciplines. Companies find the incentives for relocations and expansion attractive, and there is plenty of space to go around – currently, more than 1.5 million square feet of office space is under construction and there is nearly 15 million square feet of vacancy.
  • Salt Lake City, Utah: Slowly gaining a reputation as the “Silicon Slopes,” high-tech companies have been clustering in Salt Lake City, lured by the quality of life and low cost of real estate and business costs. Its financial prominence has grown as well as companies like Goldman Sachs have established significant outposts. As the region doles out tax breaks and other benefits to companies relocating or creating new jobs in the area, more companies and talent are certain to take note.

Commercial property executives in the tech sector charged with expansion and relocation would be prudent to take a second look at the NERDS markets. Here, companies can experience lower business costs while harnessing a pipeline of talent, the likes of who are attracted to the lower cost of living in an increasingly vibrant city.

Julia Georgules is a Research Manager for the Northern California Region. In her role, Julia is responsible for directing office market research for San Francisco and the East Bay. She can be reached at julia.georgules@am.jll.com.

Phil Ryan is a Research Analyst for the Washington, D.C. region, responsible for commercial real estate research and trends, demographic analysis and macroeconomic research to support all business lines as well as external clients. He can be reached at Phil.Ryan@am.jll.com