If you were looking to get into the technology industry 10 years ago, chances were high that you would have had to relocate to one of the sector’s traditional hotbeds: the San Francisco Bay Area, Seattle, Los Angeles or New York City.
And while these hubs still remain home to an outsized share of the tech industry’s employment base, decentralization in tech has led to more opportunities in cities with more nascent scenes, and it’s leading to an ongoing shift in the office real estate landscape, according to Marcus & Millichap.
Over the past decade, metros such as Atlanta, Austin, Denver and Orlando have seen rapid growth in tech hiring. The COVID-19 pandemic, the subsequent work-from-home revolution and the worker exodus from pricey coastal gateway markets to more affordable cities further exacerbated the tech migration. Even smaller markets such as Charlotte, Nashville and San Antonio, as well as cities with large universities such as Tucson, Arizona, and Raleigh-Durham, North Carolina, have been pulled in.
These swings are significant, considering that tech companies have been a key driver of office-space leasing in recent years. Consider, for example, the change in office-space availability between fourth-quarter 2021 and first-quarter 2022. Denver recorded one of the largest office vacancy rate declines during this period while Austin, Orlando, Tucson and Raleigh-Durham each recorded vacancy declines of at least 10 basis points.
Marcus & Millichap data shows that the demand pendulum hasn’t firmly swung toward tech decentralization just yet. Office vacancies in Charlotte, for example, actually increased by more than 30 basis points quarter over quarter, as did vacancies in San Antonio and Nashville. But the trend bears watching, especially as more workers return to in-office operations, the commercial real estate services company reported.
Geographically, Western metros saw the largest office vacancy decreases from Q4 2021 to Q1 2022, with Las Vegas and San Jose joining Denver in topping the list. Southern cities such as Miami, Houston and Jacksonville also posted vacancy rate declines of at least 10 basis points.
Spikes in Western and Southern office use are supported by data from security company Kastle Systems, whose “Back to Work Barometer” tracks the number of people entering the physical workplace. The barometer found that April attendance was highest in southern Sun Belt cities, although office use in the West is sharply trending up. Key card entries to offices in San Francisco, Los Angeles and San Jose saw significant gains.