Talent and Real Estate Cost are Foremost Concerns for Tech Companies, New Cushman & Wakefield Report Finds
This week, Cushman & Wakefield released its “Tech Cities: The Global Intersection of Talent and Real Estate,” a new report that examines the top location strategy drivers for tech occupiers, identifies the top global tech markets and the impact of tech companies on office real estate. In the report, the firm has ranked Denver-Boulder as a top tech city in the Americas based on various factors.
On a global scale, tech is a larger portion of major economies — and commercial real estate — than ever before. Over the past decade, global technology employment increased substantially. Across the largest 15 global economies, information and communication employment increased by nearly 23 million workers, and it is forecast to grow by 17%, adding another 12 million workers over the next 10 years.
“The tech sector will remain a driving force for economies around the globe,” said David C. Smith, global head of Occupier Insights at Cushman & Wakefield. “Even with the recent volatility in the economy, demand for tech talent will not abate anytime soon. Because of this, the evolution of cities as clusters for tech talent and tech occupiers will remain critical to commercial real estate decision-makers.”
After a dip in the middle of 2020, demand for tech talent has been on the rise. Globally, job postings for technology occupations (i.e., computer programmers, IT network professionals, and analysts and data scientists) increased over 50% in the first year of the pandemic. In the 10 largest global economies, there are now 2.7 million more office workers than at the start of the pandemic.
Cushman & Wakefield selected more than 115 different tech cities across the world to evaluate the talent availability and cost, office real estate and business environments. The top tech hubs in each global region are identified by aggregating 14 factors, weighing each according to perceived importance for tech companies’ market selection criteria, and then validating through industry experts and rigorous model testing.
For North America, the San Francisco Bay Area ranked as the top tech city, followed by Toronto, New York, Seattle, Los Angeles, Atlanta, Washington, D.C., Dallas-Fort Worth, Boston and Montreal, in that order.
Talent remains a critical resource through which tech occupiers evaluate potential locations. The SanFrancisco Bay Area leads North America with approximately 280,000 tech jobs, followed by New York with 259,000 jobs and Washington, D.C. with 216,000 jobs.
“Finding and keeping top talent is top of mind for tech companies, especially given the tight labor market and technical skills some tech companies require,” Smith said.
Markets such as Toronto and the San Francisco Bay Area are likely to continue to be tech occupation hotbeds. Markets with medium-sized labor pools can also have an attractive balance of talent, such as Montreal.
The number one cost for tech companies is talent. The San Francisco Bay Area continues to live up to its reputation as the highest-cost market in North America for tech talent. Across 100 global markets, data scientists on average have a base salary of $90,000, however, the average pay is above $150,000 in the San Francisco Bay Area. Markets in the Sun Belt offer savings compared to major U.S. tech hubs, as do Canadian markets. For example, the weighted average base salary in Toronto is two-thirds of the San Francisco Bay Area and 20% below Seattle.
Occupiers are looking for opportunities to save on the leasing and build-out of high-quality office space that will serve as innovation and collaboration centers. Real estate cost in North America is highest in the traditional major cities including New York ($78 psf), San Francisco Bay Area ($76 psf) and Toronto ($66 psf). Cost-effective options can be found in much of Latin America and secondary markets in the U.S. Midwest, such as Kansas City ($23 psf), Cincinnati ($23 psf) and St. Louis ($19
With increased flexibility, the quality and location of office space becomes more important. It is critical to identify markets with dynamic ecosystems of tech companies and employees, as well as ample availability of high-quality office space. Construction deliveries will continue to create opportunities for tech companies to move into new, high-quality space that attracts and retains talent in critical labor markets.
In the Americas, New York City has the deepest pipeline of office space under construction, at 16+ msf. As a percentage of current inventory, however, that only represents 6% of the current inventory in Manhattan, well below the share of inventory under construction in Vancouver, Austin and Toronto, all of which have over 9% of inventory currently under construction.