Tech Centers Driving Growth and Greater Commercial Real Estate Occupancy in Multiple Cities

January 31, 2012

A mid-January commentary in The Kiplinger Letter stated that the technology industry is driving growth, jobs and economic vigor with California leading the way (the state accounted for one in seven jobs created in the U.S. during 2011). In addition to the San Jose (Silicon Valley) to San Francisco submarkets, metro areas reaping the tech benefit are Seattle, Boise, Phoenix, Austin, San Diego and in the east, Raleigh N.C.

During the recent two years, the San Francisco Bay Area’s tech-strong economy, along with market drivers in social media, gaming and life sciences, have generated a larger volume of big transactions in Silicon Valley than just about any other period in history.

From early 2010 through the close of 2011, a combined 98 lease and sale transactions of 100,000 square feet or greater closed from San Jose to San Carlos, with an astounding total of 22,104,951 square feet of office and R&D space, according to Cornish & Carey Commercial Newmark Knight Frank.

The Bay Area’s commercial real estate market gained traction in 2010 and genuinely caught fire in 2011.

During 2011, 68 transactions of 100,000 square feet or greater closed in office and R&D sectors, totaling 15,862,169 square feet. In fact, total net absorption for Silicon Valley office and R&D product for 2011 was 5,483,943 square feet – an amount that is even greater than 1999 and 2000, which were record years before the bubble burst.

While the Bay Area witnessed several mega deals (Facebook and VMware each did nearly 1 million-square-foot deals and Google did one in excess of 700,000 square feet), commercial real estate conditions improved in the other tech cities as well.

In Austin, the overall office vacancy rate has declined to 16%, the lowest level in three years, according to Grubb & Ellis. Meanwhile, the Seattle Times ran an article late last year with a headline: ‘Commercial Landlords Rejoice! The Office Vacancy Rate is Dropping.’ The Times article cited a 55,000-square-foot leased inked by Expedia in Bellevue’s news Skyline Tower. And in Boise, one of the city’s headquarters companies – Clearwater Analytics, expanded its downtown presence last year by leasing an additional 11,561 square feet in the 9th & Idaho building, reports Colliers International. In addition, with office vacancy hovering at 16% during the 4th quarter of 2011 and Micron Technology continuing to expand its physical presence in Boise, additional start-up tech companies are likely to find opportunity in this market.  One example is the company Balihoo, which just secured an additional $5,000,000 of venture capital funding to expand its national presence.  Balihoo is headquartered in Boise.

Tech is not only driving jobs, but wages, too.

Tech-jobs website operator Dice Holdings Inc. reported that average annual salaries for Silicon Valley technology workers surpassed the $100,000 mark last year, pushed higher by the competition among tech companies to recruit and retain software and other engineers and programmers. The Valley’s tech salaries increase 5.2% in 2011, to $104,195, compared with a 2% increase for tech workers in the rest of the United States, to $81,237.

On the flip side, Kiplinger forecasted for this year that ports, manufacturing and warehousing will slow down around NYC, Northern New Jersey and Connecticut because of volatility in the stock markets with layoffs in NYC, and recession in Europe.

Posted by Gary Marsh


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