Denver Benefits from Tech Firm Migration, says CBRE
DENVER – Technology companies based in the top four tech headquarters markets—the San Francisco Bay Area, Seattle, Boston and New York—are expanding into new markets, creating more demand for office space and driving office rent growth in the beneficiary markets, according to CBRE’s annual Tech-30 report, which measures the tech industry’s impact on the office sector in the 30 leading tech markets in the U.S. and Canada. The Denver office market has benefited from this trend, with tech firms from the top four tech headquarters markets taking 1 million square feet in Denver over the past five years.
“When tech companies are looking to expand into a new market, they are looking for high-quality talent and the room to grow and scale operations. As tech firms run out of space in places like San Francisco, they see Denver’s balanced office vacancy rate, robust development pipeline, strong in-migration and good infrastructure and ultimately decide this is an advantageous place to be,” said Alex Hammerstein, senior vice president with CBRE’s Tech and Media Practice in Denver.
Buoyed by double-digit tech-sector employment growth, Denver ranked ninth for office rent growth among the Tech-30, up six spots from 2017. But while Denver’s average office asking rents rose 9.6 percent from Q2 2016 to Q2 2018, reaching $27.66 in the second quarter of this year, they are still well below the nation’s top tech HQ markets, including San Francisco and New York City, which boast office rents of $75.64 and $74.35 respectively.
Denver had more than 2.8 million square feet of office space under construction at the end of September 2018, with more projects in the planning phase. At 14.6 percent, Denver’s office vacancy rate is also nearly double New York’s (7.6 percent) and nearly triple San Francisco’s rate (5.2 percent).
“As space availability in top tech submarkets continues to tighten, we expect large tech companies to continue to expand outside their headquarters markets—including further into secondary and even tertiary markets. Large tech company expansion into smaller markets will help foster innovation clusters, further boosting job creation and creating additional office demand,” said Colin Yasukochi, director of research and analysis for CBRE in the San Francisco Bay Area.