Have you experienced an increase in technology companies renting office space?

  • No (88%, 7 Votes)
  • Yes (13%, 1 Votes)

Total Voters: 8

National office vacancy decreases have been fueled by the technology and energy industries, data from Reis, Inc. shows. Of the U.S. cities evidencing the highest nonresidential rent growth in the first quarter of 2012, half of these are centers of tech employment and include San Francisco and San Jose.

San Francisco’s average office rent has risen 7% since 2011, a rate over three times greater than the national average. The city’s 14% office vacancy rate is the eighth lowest in the nation.

The reason for this localized growth is the business of San Francisco’s nonresidential tenants, according to Cresa, an international commercial real estate firm. The technology industry is growing faster than any other trade, and its demand for prime office space follows.

However, the current growth in office rentals has yet to fuel new nonresidential development. The national percentage of new office space completed in the first quarter of 2012 was 5% less than that completed in the first quarter of 2011.

first tuesday take:

Not to exhaust a first tuesday mantra, but jobs move real estate. Considering the tech industry is creating more new jobs than any other industry, it’s not surprising office tenants are composed of a growing sector of technology companies. No new employees equates to no additional space bought or leased.

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Jobs move real estate

This is only the beginning of a long-term trend. The nature of technology is to be ever growing and improving, and these sorts of jobs appeal strongly to members of the younger Generation Y (Gen Y).

Tech job growth is an obvious indicator of nonresidential real estate activity, but this data also illuminates the direction in which residential real estate is heading. It’s simple mathematics. As Gen Y rises as the next force in California real estate purchases, real estate agents need to follow the migration of this demographic to find the next profitable market for their services. They are fast moving in on the turf held by others during the past momentum market, and that is creating competition from other than just big established names.

The location of buyers’ and renters’ homes is dictated in large part by the location of employers in their professional fields. Since a growing number of California’s burgeoning real estate demographic are employed in the tech sector, real estate agents can count on future home purchases or rentals in cities where these jobs are based.

This is currently evidenced in San Francisco, as the rate of residential rent is rapidly increasing as more high-paying jobs are created.

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Nonresidential indicators point to “go”

It’s all happening in the city, eventually

The same principle applies outside of the tech industry as well. Agents in different locales must look around to find the equivalent of San Francisco’s technology companies in their local market. This may take the form of a variety of industries, but the core concern is the same: what types of businesses are flourishing locally?

The first step in finding the future direction of your real estate market is to identify what industry is hot in your area. Then, get the city council to lift residential height restrictions and increase density to accommodate recovery prosperity. Following a crisis, almost everything changes direction.

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Get creative with vacant retail space

Re: “San Francisco Leads Rent Growth as U.S. Office Vacancy Falls” from Bloomberg