BOSTON – Greater Boston ranks sixth in total high-tech leasing, and fifth in high-tech venture capital funding among major U.S. markets. According to JLL’s 2015 United States Technology Office Outlook, the San Francisco Bay Area continues to lead the way, but Boston and Cambridge remain ideal target markets for growing high-tech companies.
Nationwide, technology companies have been responsible for the largest share of leases 20,000 square feet and larger. Additionally, over the past year, 73 percent of the sector’s office leases represented occupancy growth. In key markets like the Bay Area and East Cambridge, that growth is coming at a cost. Northern California holds nine of the top 15 most expensive in-demand technology submarkets, while East Cambridge cracks the top ten with average asking rents of $67.21.
“Cambridge is one of the strongest markets that we track globally at JLL,” said Molly Heath, Senior Vice President of JLL’s Cambridge leasing team. “The technology industry really views a home in Cambridge as essential to driving their business.”
“Other markets are not competing against Silicon Valley. They’re competing to be more like Silicon Valley,” said Julia Georgules, Director of U.S. Office Research for JLL. “Technology has become so pervasive in business that it’s now becoming a part of every industry and every market. This is generating a new momentum and energy in smaller markets and making them attractive to the type of talent that the technology industry is recruiting.”
Not all locations are equal, however, particularly for young startups and small-to-mid sized technology firms. JLL evaluated the key factors, including market startup opportunity and cost, to develop a proprietary Locator Matrix to determine which locations currently offer the right fit for these companies.
Greater Boston sits in high cost, high startup opportunity quadrant of the matrix, along with San Francisco, Silicon Valley, and New York City. These markets present clear opportunities thanks to existing tech clusters, greater access to capital, higher concentration of innovation, and especially in the case of Boston, great talent accessibility. For tech companies with less cost sensitivity, these are the best target markets for growth.
“High cost, high opportunity is a reflection of the people,” said Bryan Sparkes, Senior Vice President of JLL’s Downtown Boston leasing team. “These companies are all trying to attract the top talent, and they’re staying here and they’re growing here because the talent is here.”
“Companies weight the real estate cost against the talent they can access that they know they need,” added Heath. “It becomes a business decision versus a real estate decision and ultimately they’re willing to pay to be here because they know that they have to be.”
For younger companies with more sensitivity to cost, JLL’s Locator Matrix identified 21 markets that were ideally suited for their needs. Findings included:
• Austin: Texas’s tech hub was a prime low-cost alternative, however, the market has caught up slightly with average asking rents sitting at $32.59 per square foot, 10th highest among the report’s 37 markets. Austin’s 15 percent annual job growth, second only to San Francisco, will keep talent attraction strong.
• Nashville: The startup future is bright for the Music City due to Tennessee’s selection for a $100 million program called TechHire. Lack of office space will challenge rapid expansion, but innovation will drive interest as Nashville led the country in patent density (utility patents per every 1,000 people).
• Phoenix: With one of the most active development pipelines in the country—3.9 million square feet under construction—Phoenix’s workplace offerings will evolve toward tech tenant tastes at competitive prices. Phoenix also offers the second lowest average monthly apartment rent of the report’s 37 markets.