Salt Lake City Ranks #1 for Office Net Absorption Growth Among CBRE’s Tech-30
06 11 2018
Buoyed by robust tech-sector employment growth, Salt Lake City ranked first for office net absorption growth (growth in occupied office space) among the 30 leading tech markets, according to CBRE’s annual Tech-30 report, which measures the tech industry’s impact on office rents in the 30 leading tech markets in the U.S. and Canada.
Top 10 Office Markets by Overall Net Absorption Growth
NET ABSORPTION GROWTH
Q3 2016-Q2 2018
|Salt Lake City||11.4%|
Salt Lake’s high-tech employment grew 8.1 percent during 2016 and 2017, with office asking rents rising 9 percent from Q2 2016 to Q2 2018 to $23.96 per square foot. Salt Lake City’s combination of low office rents—particularly compared to primary markets like San Francisco and Seattle—and steady high-tech labor pool growth make it an attractive market for commercial real estate investors. Furthermore, while many tech firms are willing to pay a significant premium for office space in leading tech submarkets—13 percent more on average, according to the study—Salt Lake’s top tech submarket, Tech Corridor, has just a 3.5 percent rent premium.
“Despite accounting for only 38 percent of the total suburban market size in both Salt Lake and Utah Counties, the Tech Corridor has accounted for 67 percent of total net absorption since 2017. Large tenants are drawn to the area because of low costs, availability of new product and access to talent,” commented Nadia Letey, first vice president and office specialist at CBRE in Salt Lake City. “Looking ahead, the overall tech market is expected to remain healthy; vacancy in the suburbs is in the single digits and development—especially in the Tech Corridor—is strong, with two-thirds of new construction already pre-leased."
Impact of Tech Job Growth on Office Markets
The influence of tech job creation on office market growth is pervasive across the U.S. and Canada, with eight of the Tech-30 markets posting rent growth of 10 percent or more between Q2 2016 and Q2 2018. Office rents also increased in 26 of the 30 primary tech submarkets over the same period. Salt Lake City rents have experienced slightly more modest growth throughout this period, growing at 9.0 percent and ranking 12th on the list.
Top 10 Overall Markets by Rent Growth
|MARKET||RENT GROWTH RANK||GROWTH RATE
“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.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.