New York also produces the most tech-related degrees in the U.S., a leading indicator of tech market strength, according to the latest “Scoring Tech Talent” report
New York maintained its top-five position on the annual Tech Talent Scorecard, part of CBRE Group, Inc.’s annual “Scoring Tech Talent,” research report which ranks 50 U.S. and Canadian markets according to their ability to attract and grow tech talent. The report also ranks New York as the top market in the nation when it comes to producing tech-related degrees with more than 15,000 completed annually, making it fertile ground for innovation.
Coming in at #4, New York was outranked only by the San Francisco Bay Area, Washington, D.C., and Seattle, while Austin clinched the #5 spot (representing that city’s entree into the top five). While these tech markets continue to lead the pack year after year, the latest CBRE report showed that competition for talent is getting tougher as more highly skilled tech workers are flocking to fast-growing tech markets—dubbed “momentum markets” in the CBRE report—where the cost of living is lower and tech jobs are plentiful, including Nashville, Charlotte, Tampa, Seattle and Phoenix.
Rankings for the Tech Talent Scorecard are determined based on 13 unique metrics including tech talent supply, growth, concentration, cost, completed tech degrees, industry outlook for job growth, and market outlook for both office and apartment rent cost growth. In the number 6-10 slots were Dallas/Ft. Worth, Boston, Raleigh-Durham, Atlanta and Baltimore. Rounding out the top 15 were Phoenix, Toronto, Chicago, Orange County and Minneapolis.
Influential Factors Shaping Tech Markets Today
The CBRE report highlighted several influential factors shaping both large and small tech markets today.
Educational Attainment/Tech Degrees: Nearly 70 percent of the top 50 tech talent markets have an educational attainment rate above the U.S. average (30 percent). More relevant to this study is the number of graduates who have earned technology degrees. New York was the top market in terms of the number of tech degrees completed, producing 63,456 tech graduates between 2010 and 2014 and adding 64,831 tech jobs between 2011 and 2015, for a net gain of 1,375. Other leading markets for tech degrees completed include Washington, D.C., Los Angeles, Chicago, Phoenix, Boston, the San Francisco Bay Area, Atlanta, Columbus and Detroit.
Cost of Living: According to Moody’s Analytics, 36 of the top 50 tech talent markets have a cost of living above the U.S. national average. CBRE compared the average apartment rent to the average tech-worker wage in each market and found that even in the most expensive markets, tech wages are able to cover the high cost of living (using the affordability benchmark that allocates 30 percent of income to housing). Unsurprisingly, New York has the most-expensive wage-to-apartment rent ratio of the 50 markets examined in the CBRE report, at 33.3 percent. Top momentum markets like Charlotte and Nashville, clearly benefited from affordability with wage-to-apartment rent ratios of only 13 percent and 17 percent, respectively. Oklahoma City has a wage to apartment rent ratio of just 12 percent, making it the most affordable of the markets examined in the CBRE report.
Presence of millennials: The presence of higher educational institutions help markets to attract high concentrations of millennials. Madison, Pittsburgh and Boston took the top spots, each boasting millennials as 25 percent or more of the total population. Six large tech markets increased their millennial population by more than 10 percent since 2009, with Washington, D.C. growing the fastest at 27.1 percent. During the same period, five of the smaller tech markets increased their millennial population by more than 10 percent with Salt Lake City and Richmond growing at significantly faster rates than the others. New York City’s population of 20-something millennials grew by 117,300, or 9 percent, since 2009–representing 118 percent of New York total growth in a population of nearly 8.5 million.
Impact on Office Markets
High-tech companies’ share of major leasing activity increased from 11 percent in 2011 to 18 percent in 2015 nationwide—the largest single share of any industry. Many tech-talent markets, especially those with high concentrations or clusters of tech companies, have seen rising rents and declining vacancies as a result. Significant demand for office space in top markets that have added tens of thousands of workers during the past five years raised rents to their highest levels and pushed down vacancy rates to their lowest.
Office asking rents have risen a whopping 46 percent to $75.35 per sq. ft. from Q1 2011 through Q1 2016, the second most in the CBRE study, behind only the San Francisco Bay Area. The vacancy rate has dropped 100 basis points to 7.3 percent over the same period. New York is the third-tightest market in the CBRE study, behind Nashville and the San Francisco Bay Area.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
