Markets in the Sun Belt offer savings compared to major US tech hubs, as do Canadian markets.
San Francisco is the top city for tech occupiers in North America, according to a new survey, followed by Toronto, New York, Seattle, Los Angeles, and Atlanta.
Cushman & Wakefield analyzed 46 tech cities to evaluate the talent availability and cost, office real estate and business environments against 14 key factors. The firm found that talent is a “critical resource” through which occupiers evaluate possible locations, and the San Francisco Bay Area leads North America on that metric with approximately 280,000 tech jobs, followed by New York with 259,000 jobs and Washington, D.C. with 216,000 jobs.
But San Francisco is also the highest cost market in North America for tech talent: data scientists on average have a base salary of $90,000, a number that reaches above $150,000 in the San Francisco Bay Area. Cushman experts say markets in the Sun Belt offer savings compared to major US tech hubs, as do Canadian markets. And when it comes to real estate costs, which are highest in traditional gateway markets, Cushman & Wakefield analysts say secondary markets in the Midwest such as Kansas City, Cincinnati and St. Louis will continue to be attractive alternatives.
But ultimately, “thick labor markets with high-quality talent will attract additional occupiers looking for technical skills, increasing competition for the existing talent,” the report notes. “This can be a virtuous cycle where more job availability entices additional qualified workers to a city, which in turn makes it more attractive for companies to move into and expand in those markets.”
An analysis from Moody’s earlier this year found that shifting migration patterns are driving tech firms to look to secondary markets, with the firm’s Thomas LaSalvia and David Caputo noting that “generally, a well-managed company in a great location understands the tug-of-war between efficiency gains from remaining in an established cluster and the increasing cost of business to stay there.”
“Concentrations of labor, intermediate input and information sharing are classic examples of efficiency gains when in an established market,” the pair said. “The high tenant demand tends to increase both rent levels and wages particularly in areas with limited buildable land. If costs overshadow benefits, firms will look elsewhere and likely land in cheaper spots, but with fewer benefits, particularly human capital or skill.”
“Finding and keeping top talent is top of mind for tech companies, especially given the tight labor market and technical skills some tech companies require,” said David C. Smith, Global Head of Occupier Insights at Cushman & Wakefield. He says cities like Toronto and the Bay Area are likely to continue to be hot for tech companies, while markets with medium-sized labor pools like Montreal can also have an attractive balance of talent, such as Montreal.
“The tech sector will remain a driving force for economies around the globe,” Smith said. “Even with the recent volatility in the economy, demand for tech talent will not abate anytime soon. Because of this, the evolution of cities as clusters for tech talent and tech occupiers will remain critical to commercial real estate decision makers.”
New York City has the deepest pipeline of office space under construction, at more than 16+ msf, a figure that represents just 6% of the current inventory in Manhattan.