Strong demand for skills, such as software development, hardware engineering and information security, coupled with a tight labour supply, is driving companies to locate in markets with the largest concentrations of high-quality talent, according to CBRE’s Scoring Tech Talent Report.
While value is a key driver when it comes to choosing an office location, the agent found that companies were increasingly willing to pay a premium to access the highest quality tech talent.
The US-focused report found that cost variances across the markets it studies varied widely. Taking talent and real estate costs into consideration, a typical US-based, 500-person tech company needing 75,000 sq ft of office space can expect its total annual cost to range from $24m in Vancouver, the least expensive of the 50 markets included in the CBRE report, to $57m in the San Francisco Bay Area, the most expensive market.
The best-value markets with the highest quality of talent, according to CBRE, are Toronto and Vancouver followed by Indianapolis, Pittsburgh and Detroit.
“Since the cost of talent is the largest expense for most firms, the quality of that tech talent is becoming one of their most important considerations. The skills of the available labour pool do not appear to align with available jobs, causing a structural impediment to growth for companies across North America,” said Colin Yasukochi, director of research and analysis for CBRE in the San Francisco Bay Area.
Tech firms make up the biggest sector of major leasing activity across the US, taking a 19% market share this year, up from 11% in 2011. The growth of tech firms has pushed office rents up in almost every market in the top 50 and vacancy down, with the biggest impact in the most tech-concentrated sub-markets, says the report.
Rental growth is most prominent in the large tech markets, with office rents in the San Francisco Bay Area two-thirds higher than five years ago. Vacancy rates in the San Francisco Bay Area and New York are the lowest of the top 50 tech talent markets.
To send feedback, e-mail Samantha.McClary@egi.co.uk or tweet @Samanthamcclary or @estatesgazette
