The technology sector is still the leading industry for real estate expansion and employment growth in the United States, according to JLL’s 2016 Tech Outlook. According to the report, tech hubs like Silicon Valley and Seattle are still top choices when it comes to attracting top talent; tech companies are focusing more on building diverse workforces; and some young, growing companies are looking toward more affordable secondary markets such as Austin, Chicago, Denver and Philadelphia.
That’s just a sampling of the information in the report. Here are the top 10 tech trends and how they will impact the economy, based on JLL’s 2016 Tech Outlook.
- Technology remains the leading industry for real estate expansion in the United States, and has fast become a key economic driver in many cities. Tech companies are consistently driving the most leasing activity across the country—nearly 25% of all leases over 20,000 square feet in the past two years—followed distantly by banking and finance companies.
- National tech employment may be slowing, but it’s still driving employment growth in the United States. Tech is outpacing total employment growth by two to one.
- As tech companies continue to add to their employee bases, there will be a heightened focus on diversity. Current research shows that a diverse employment base leads to greater innovation, a stronger culture and better financial performance. Tech companies nationwide are committing resources and pledging to adopt more inclusive hiring practices, with the goal of creating workforces that reflect their customer bases and the population at large.
- The tech industry continues to be a key focus for VCs, representing 72% of activity this year to date. Momentum, however, is slowing. VCs are getting more focused on business fundamentals, favoring firms with solid business plans and strong customer bases.
- Well-funded, late-stage startups will continue to grow their real estate footprints, but at a less aggressive rate given the tightening funding environment. Larger companies with multiple locations will likely continue to grow in secondary tech markets where they’ll find the same exposure to talent and capital that they need to prepare for future exits.
- Seed and early-stage companies will become more sensitive to the cost of real estate as funding becomes harder to obtain. JLL predicts they will focus more on a gradual expansion in home markets, versus establishing beachhead locations in major tech centers where high barriers to entry make it tough to find both space and talent.
- Though there’s promise for renewed IPO activity, tech companies looking for an exit are increasingly turning to acquisition. Honeywell, Verizon, General Motors, and Walmart have all recently made significant acquisitions, investing in technologies that will expand their businesses organically, and help them remain competitive against their disruptive counterparts—a major trend in tech M&A.
- Tech companies that can afford to will continue to pay a premium for locations that attract and retain the brightest talent and have a strong tech ecosystem.
- Priced out of some established tech hubs, early-stage firms may seek more affordable secondary markets with strong, diverse talent and industry momentum. JLL’s Tech Locator Matrix helps technology companies of any size determine which of 45 U.S. cities analyzed is best suited for their growth plans. Check it out.
- Established tech hubs like the Bay Area, Boston and New York will remain the centers of innovation for the foreseeable future, while smaller markets are being legitimized by brand-name tech. From San Francisco and Seattle-Bellevue to South Florida and Charlotte, the tech industry is planting roots across the country. JLL’s Tech Market Score is determined by an analysis of each market’s economic momentum, talent pool, innovation and cost—and aims to help real estate investors quickly gauge a market’s resilience through periods of economic contraction.
For more detailed information, visit JLL online and download the complete 2016 U.S. Technology Office Outlook.