Is the Next Silicon Valley Somewhere in Florida?

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Tech is one of the fastest growing industries in the U.S. Its impact has spilled over into almost every sector, including commercial real estate.  As JLL’s latest tech report, the 2016 Tech Outlook, points out: technology remains the leading industry for real estate expansion in the United States and has quickly become a key economic driver in many cities.

Tech Report

The report highlights ten trends that are shaping the technology sector:

  1. National tech employment may be slowing, but it’s still driving employment growth in the United States
  1. The tech industry continues to be a key focus for VCs, however, momentum is slowing
  1. Well-funded, late-stage startups will continue to grow their real estate footprints, but at a less aggressive rate given the tightening funding environment
  1. Seed and early-stage companies will be more sensitive to the cost of real estate as funding becomes harder to obtain
  1. Though there’s promise for renewed IPO activity, tech companies looking for an exit are increasingly turning to acquisition
  1. Priced out of some established tech hubs, early-stage firms may seek more affordable secondary markets with strong, diverse talent and industry momentum

Florida’s urban cores are sure to feel the effects   of these trends over the coming months. The report also digs into the State’s tech-centric markets to dissect the opportunities and challenges facing each market in the technology sector:

Tampa Bay

The Tampa Bay region continues to have the most available positions posted in STEM (science, technology, engineering and mathematics)-related fields in all of Florida. Job openings have helped drive rapid in-migration. The area also offers favorable market and business conditions – including lower rent and lower cost of labor – making the region popular for technology firms’ back-office locations.

Tampa Bay’s tech community is currently challenged by the limited availability of large blocks of space and a lack of qualified candidates for open positions. Local universities have yet to make technology-focused majors a priority, inhibiting technology companies from hiring recent college graduates.

High-leasing activity in the past few years has left very few large blocks of space available, making it difficult for new companies to move into the region.

Tech Trends in Commercial Real Estate

Orlando

As one of the fastest growing markets in the country by population; Orlando is home to a highly educated workforce. Much of this growth can be attributed to millennials migrating to the area. This strong talent pool provides great opportunity for continued tech growth.

The Creative Village development in downtown Orlando is hoping to tap into the local talent and attract new companies by targeting the technology industry in an effort to create a central technology hub, similar to how Lake Nona created a medical cluster.

Similar to Tampa Bay, Orlando’s limited current availability of large blocks of space may deter major companies.  As the area’s office space vacancy declines and rental rates rise, businesses may consider built-to-suit options.

READ RELATED: 5 Trends Changing Florida’s Retail Market

South Florida

South Florida’s tech sector has rapidly established itself as a legitimate second-tier U.S. tech hub.  More than 600 tech startups now call South Florida home, and the region is attracting many high-tech job seekers and employers. The area’s early establishment of real estate relationships and reputational capital will pay significant dividends as the local tech sector matures and expands.

The absence of a true homegrown, large-scale software development success story  (ie. Amazon, Facebook, Google) to entice a sizeable population of experienced talent to relocate from other markets is South Florida’s biggest hurdle on its quest to become the next Silicon Valley.

With stiff competition among metro areas in Florida (and the Southeast in general), viable real estate options for technology companies is more important than ever – particularly in submarkets attractive to young, highly-skilled professionals in technology fields.

About the Authors

Brent_Miller_JLLBrent Miller, Executive Vice President

Brent Miller is an Executive Vice President sharing responsibility in the daily oversight of the Tampa office operations, collaboration among JLL’s integrated service offerings and focus on implementing the company’s growth strategy in the Tampa Bay region. Additionally, he is responsible for managing lease and purchase transactions for office users in Central Florida. Brent specializes in property acquisition, disposition and lease restructuring on behalf of his clients. Brent exclusively represents office and warehouse tenants in lease and purchase transactions, as well as disposition requirements. Contact Brent.

Aaron_Gray_JLLAaron Gray, Senior Vice President

Aaron Gray focuses on providing transaction services primarily to office tenants in the market as well as cross selling JLL’s global platform to the Florida marketplace. Aaron has completed over $70MM in lease transactions in the Orlando MSA within the past 12 months, making him one of the most active brokers in this market. He focuses primarily on representing tenants to generate leverage within the market in order drive maximum concessions for the clients he represents.Contact Aaron.

 

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