Where Are the Top Tech Talent Markets?
- Jul 20, 2020
Washington, D.C., has risen to the No. 2 spot on CBRE’s annual tech talent report, coming in as the runner-up to the San Francisco Bay Area. Those cities were followed by Seattle, Toronto and New York City.
The San Francisco Bay Area saw a 30.5 percent increase in total tech talent, allowing the metro to continue its streak as the top city in CBRE’s rankings. While the top 10 cities mostly shifted positions among themselves, other cities were able to make leaps in their rankings like Ottawa, Orange County, Calif., Baltimore, Columbus, Ohio, and Newark, N.J.
The study also reported on the number of graduates with tech degrees that cities produced in relation to how many tech jobs were created, with San Francisco and Toronto producing far more jobs than degrees. The San Francisco Bay Area created 88,840 jobs and produced 36,882 degrees between 2014 and 2018, while Toronto created 66,900 tech jobs on top of 24,083 degrees, making both cities strong job creation markets and “brain gains.” Other metros like New York City, Washington, D.C., and Boston were considered “brain drains” based on the high number of graduates they generated in comparison to the low number of tech jobs created.
Emerging tech markets
While major cities consistently rank at the top of the charts, there are emerging tech markets in the Midwest, the Southern U.S. and Latin America. In Latin America, the tech economy began with manufacturing and business services, but has switched toward software development and innovation in the most recent economic growth cycle. The report noted that Latin America’s tech talent workforce has grown by almost double the U.S. rate over the last five years, with the largest markets located in Sao Paulo, Brazil; Mexico City, Mexico; and Santiago, Chile; while the fastest-growing market is in Bogota, Colombia. With relatively lower real estate costs, Latin America has been attracting more tech employers.
Back in the U.S., smaller markets have shown potential to become tech talent pools. The report highlighted Huntsville, Ala., Omaha, Neb., Colorado Springs, Colo., and Dayton, Ohio, as market possibilities for tech companies to expand to. The Waterloo Region in Ontario earned the top spot for CBRE’s lesser-known markets ranking.
Post-pandemic market influence
While the report doesn’t reflect the impact of the COVID-19 pandemic, as the statistics are from the year-end 2019 employment data, previous economic downturns show that the tech sector is very resilient. Throughout the Great Recession from 2008 to 2010 and the dot-com bust from 2000 to 2002, tech talent employment declined at a far slower rate than the national level.
With markets beginning to look for paths to recovery, following tech talent growth may reveal some resilient markets. In the last five years, tech talent jobs have increased by 17 percent, adding 777,000 jobs to the economy. The pace was double the national average and was the top driver for U.S. office leasing activity during that time frame. Significant demand from the tech talent world also continues to bolster commercial real estate numbers.
“Through this pandemic, we’ve realized how important tech and tech talent is,” Colin Yasukochi, executive director of CBRE’s Tech Insights Center, told Commercial Property Executive. “Once conditions start to stabilize, we think a lot of these tech talent markets are going to lead out of the pandemic and grow faster than others.”
Yasukochi also told CPE that CBRE reviewed the numbers of jobs lost due to the pandemic and noted that 10 percent of the jobs were related to tech talent while 90 percent of the jobs lost were linked to other departments like marketing or operations. Yasukochi added that the tech talent job market will likely slow down just like other sectors, but to a lesser extent.
As tech companies also tend to cluster in specific submarkets, the competition for office space increases, driving the area’s rents up. Large tech markets like Orange County have seen office rents that are 50 percent higher than five years ago, hitting $36.48. The highest office rents throughout the tech markets are found in New York City at $80.43 and the San Francisco Bay Area at $68.15. Vacancy rates are also tightening, especially in markets like Vancouver, the Bay Area, Ottawa and Madison, Wis., which are all below 7 percent.
Since COVID-19 has heavily impacted the real estate market, the office sector will likely experience a slower year in 2020 compared to the previous year. But tech talent markets across North America will likely remain resilient for the remainder of the year, and provide tenants and investors with strong opportunities.
“What’s really good to remember is how much more reliant each industry is on technology, everything from your car to health insurance, everyone now has an online presence and a lot of that’s being accelerated,” Lexi Russell, CBRE’s director of Research and Analysis, told CPE. “When you look back to where we were in 2001, 2008 and where we are today, our whole society is much more integrated into this online aspect and that is really the driving force as to why these technical occupations and all of the support systems around them are more resilient.”