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Charlotte ranked higher on Tech Thirty list

Charlotte climbed five notches in a year to number 4 on CBRE’s annual Tech-Thirty list, which analyzes the 30 leading technology markets in the U.S. and Canada in terms of high-tech software/services job growth.

Charlotte saw its high-tech jobs grow 33.2 percent from 2013 to 2015, up from 18.6 percent from 2012 to 2014. With a 15 percentage-point increase in momentum from one period to the next, Charlotte’s growth was the second-highest improvement among all tech-thirty markets, behind only Toronto, which posted a 20 percentage-point increase over the same corresponding periods. The CBRE report characterized Charlotte as a momentum market.

“Charlotte has a young and diverse workforce that is constantly fed by several highly-respected and high-profile universities,” said Mike Fahey, senior vice president, Advisory & Transaction Services | Occupier. “The tech talent pool in Charlotte has grown by nearly 75 percent since 2010, and the city recognizes the potential and encourages the boom by catering to entrepreneurs and supporting tech start-ups.”

Tech-related office leasing accounted for 20 percent of all office leasing in the U.S. in the first half of 2016, up from 18 percent in 2015, despite an overall slowing in tech job creation. As an emerging market, Charlotte experienced momentum in tech job creation, and new tech jobs accounted for 22.9 percent of Charlotte’s overall office job creation. The CBRE report characterized Charlotte as a “growth leader” due to its strong correlation of tech jobs and office market strength. CBRE’s report showed that the hottest tech submarkets where tech job creation continues to boom—led by East Cambridge, Palo Alto and Santa Monica—are significantly outperforming their overall markets in terms of leasing activity and rent premiums, fueled primarily by the demand for highly-skilled tech talent.

Office Rents in the Tech-Thirty

The CBRE report shows that office rents for the top submarket in each of the 30 markets analyzed increased in all but one submarket between Q2 2014 and Q2 2016. The highest rent growth in this period occurred in both established and up-and-coming tech submarkets, illustrating stiff competition among tenants to locate in areas rich in talent such as University City, Oakland/East End Pittsburgh, East Cambridge, Palo Alto and Tempe. Average office rents in Charlotte’s top tech market, Northeast Charlotte, landed Charlotte a spot on the “discount market” list, as it is considered a market that provides the best value. Northeast Charlotte rents rose 11 percent from Q2 2014 to Q2 2016 to $19.62, still lower than the majority of tech submarkets, although the Northeast Charlotte submarket had the sixth-lowest vacancy among all tech-thirty top tech submarkets as of Q2 2016.

Job Growth in the Tech-Thirty

CBRE also analyzed the Tech-Thirty markets according to high-tech industry job growth. San Francisco topped the rankings for the fifth consecutive year; its high-tech job base has grown 47.0 percent between 2013 and 2015, while average asking rents increased by 22.7 percent from Q2 2014 and Q2 2016. Eighteen markets outperformed the U.S. average of 13.7 percent job growth in high-tech software/services, with Phoenix (44.5 percent), Austin (33.3 percent), and Charlotte (33.2 percent) rounding out the top three.

Over the past five years, the software/services industry created 780,000 new jobs at a 7.3 percent growth rate and accounted for nearly 20 percent of major leasing activity. In H1 2016, tighter labor and volatile capital market conditions led to job creation slowing to a 4 percent annual growth rate, which had a slight impact on certain office markets, like Washington, D.C., New York and the San Francisco Bay Area.

“Advanced technology has integrated itself into business productivity and although the talent pool is limited, strong demand for technology services from both businesses and consumers is expected to support hiring by high-tech firms. The skills of the available labor pool do not appear to align with available jobs, causing a structural barrier to growth,” said Colin Yasukochi, director of research and analysis, CBRE. “This demand for technology should support growth among high-tech companies and high-tech office market clusters.”

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