Tech Industry Remains Biggest Force in Office-Leasing Activity Despite Pandemic-Induced Slowdown

12 Nov 2020

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The tech industry’s share of U.S. office-leasing activity in this year’s first half inched down to 20 percent from 21 percent last year, as tech employment has proven resilient during the pandemic, according to CBRE’s annual Tech-30 report. Tech remains the strongest driver of office-leasing activity in Denver, propelled by robust high-tech job growth and moderate office rent growth, compared to other leading tech hubs. 

 

The Tech-30 report measures the industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada. Net absorption – a measure of office space newly occupied in comparison to office space newly made available – registered net gains in 26 of the top 30 markets over the past two years (ending June 30). Denver ranked ninth with a 3.5 percent increase in its net absorption over that period. Denver also ranked in the top 10 for high-tech job growth, adding 9,904 new high-tech jobs in 2018 and 2019, which translates to 33.9 percent of all office jobs added during that time. 

 

Denver scored well for educational attainment, which measures the percentage of the market’s population with a bachelor’s degree or higher. Denver’s 45.8 percent ratio ranked 11th among the Tech-30 markets.

 

“Metro Denver offers a unique advantage for tech companies with its combination of highly educated talent and relative affordability. While no market has been spared from the impacts of COVID-19, Denver has fared better than most. Headwinds related to urban density and reliance on public transit are more muted in Denver compared to some of the largest tech hubs. As companies give their employees more choice in where they work, we expect to see our tech talent population grow. Denver’s relatively lower cost of living, high quality of life and abundant outdoor recreation have only become more coveted this year,” said Alex Hammerstein, Senior Vice President with CBRE’s Tech & Media Practice in Denver. 

 

CBRE found that pre-pandemic office rents increased in all but one of the top 30 markets in the two years analyzed, with five posting double-digit percentage gains. Denver ranked 24th for office market rent growth with a moderate 4.1 percent increase in rents across 2018 and 2019.

 

While tech continues to lead the pack, the impact of COVID-19 and related economic challenges clearly has affected the U.S. office market. Tech leasing activity declined by 46 percent in the second quarter from the 2019 average, in line with the 44 percent decline in overall U.S. office-leasing activity. The amount of office space offered for sublease in the Tech-30 markets increased by 42 percent, or roughly 27 million sq. ft., to a total of 90 million sq. ft. so far this year. Tech companies account for a quarter of sublease space.

 

“Few industries, if any, escape a pandemic unscathed, and tech isn’t an exception,” said Todd Husak, Managing Director leading CBRE’s Tech & Media Practice. “However, the tech industry and the office markets where they have a significant presence are proving resilient this year. Much of the industry has established its value by providing the tech products and services needed to ensure business productivity and continuity. Several indicators, such as robust venture-capital investment, point to more growth ahead.”

 

To read the Tech-30 report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.