Countless technology companies are expanding beyond Silicon Valley and branching out to new markets across the country, making tech tenants one of commercial real estate’s biggest customers. In 2015 and 2016, leasing volumes from growing tech companies topped 15 million square feet –– and 2017 figures are expected to surpass that. The industry is scarcely out of its infancy, and growth is going to be the name of the game for some time to come.
For commercial real estate professionals, staying ahead of the curve means recognizing how office users in the tech sphere are making their real estate decisions. In Florida alone, markets such as Miami and Orlando are making investments to attract and foster an entrepreneurial ecosystem that includes the tech and innovation sector. JLL’s Technology Research Group’s 7th Annual Technology Outlook report identifies the top trends influencing them, and they are:
Growing the Talent Base
Growth means increasing demand for qualified workers –– but with low unemployment and favorable economic indicators for continued growth over the next 18-24 months, competition for top performers is high. Tech firms are finding creative ways to attract new talent, which is pushing these companies to consider secondary markets for corporate expansions, stimulating the development of tech clusters in less exposed areas.
Investment in the Workplace
Tech companies are less interested in the bottom line than they are in keeping their workforce happy. While they’re not going to throw away money indiscriminately, the priority is on helping employees achieve the three tenets of JLL’s Human Experience Model: engagement, empowerment and fulfillment. In pursuit of these, they’re willing to invest in an attractive office in a convenient, trendy location stocked with amenities such as on-site cafés and restaurants, game rooms, gyms and even scheduled fitness classes.
Optimizing Space Design
Having eagerly applied the Millennial generation’s “less is more” philosophy to office space, tech businesses have virtually eliminated the private office and reduced personal workspace from the former industry standard of 350 square feet to as low as 50 square feet. But recent anecdotal evidence suggests that such extreme spatial efficiency may not be conducive to productivity. It’s likely that many tech executives will be taking a closer look at optimal space utilization. Recent successful space layouts include foot-traffic planning that encourages random encounters, a range of collaborative spaces and enough flexibility to allow teams to equip their areas as they see fit.
The Cost of Living
Markets where tech companies are clustered have welcomed an economic boom that has sent housing costs skyrocketing far beyond the means of the young talent on whom the industry relies. Instead, they’re forced into renting cramped micro units or sharing the rent with many roommates in apartments where extra bedrooms are carved out of living rooms. While some may choose to remain in the top markets regardless of the personal cost, many would jump at the chance to live and work in a more affordable location. Companies need to pay attention to where –– and how –– their staffers want to live.
New Kinds of Flex Space
Coworking is here to stay, and many companies are setting up satellite locations in coworking centers. This strategy offers them a host of benefits, including cost containment, talent management, and increased collaboration and innovation as well as additional space options available on short notice.
The line between traditional office space and coworking space is already blurred, and going forward we expect to see a greater utilization of unconventional options such as office common areas, hotel lobbies and coffee shops to accommodate the ability of people to work from anywhere, any time.
The Millennial generation is famous for its preferences for cool downtown living and reliable transportation options, but as they age and settle down these lifestyle choices may change. Raising children, for example, may foster a new penchant for suburban living and a more predictable work-life balance. Firms considering long-term moves need to think about how these issues are likely to affect talent retention in the long run.
These trends point to more activity in secondary tech markets in the coming years, with emerging tech markets remaining more diverse over the near future.