Smaller Cities, Bigger Tech Real Estate Deals: Startups Finding Talent Where You’d Least Expect It 1

No longer sequestered on the West Coast, the technology industry has been sparking economic growth and outshining other industries in cities across the United States. In its latest Tech Office Outlook Report, JLL reveals that the tech sector has driven nearly 25 percent of all U.S. office leasing activity over the past two years. Boise, Cleveland, Detroit, Dallas and Indianapolis are just some of the surprising locations where tech companies and startups are heading.

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As goes tech, so go local economies

Tech company growth has an outsized impact on local economies because the industry’s growth is outpacing other sectors. When a city becomes a hot spot for tech firms, it is likely to realize more real estate leasing and economic growth overall. According to JLL, during the past four quarters, 63.4 percent of tech companies leasing at least 20,000 square feet were in growth mode compared to the overall U.S. rate of 48.9 percent. Conversely, just 4.6 percent of tech companies were shrinking their real estate footprint versus the national average of 6.5 percent.

What’s more, the “tech effect” exhibits staying power; the submarkets most popular with tech companies five years ago remain among the most popular today.

“Tech companies have quickly become the economic driver of choice in many markets,” said Steffen Kammerer, Senior Vice President and leader of JLL’s Technology group. “Underlying evidence shows that the greater exposure a market has to the tech industry, the greater the success of a local economy. When tech leasing is strong, so are overall market conditions.”

Where are tech companies going next?

Tech companies typically look for expansion in cities offering affordable office space, abundant housing and easy access to talent and venture capital. JLL’s interactive Locator Matrix tool can be used to determine the best location for growth and tracks current trends in startup and established tech company leasing. While San Francisco, Silicon Valley and New York remain the best target markets for established companies, entry costs and competition for talent have prompted new tech companies and startups to target other markets with highly educated talent pools and access to capital. These locations include Raleigh-Durham, Atlanta, Northern Virginia and Chicago.

JLL’s Locator Matrix reveals five new markets benefiting from the tech boom:

  • Boise: Since Micron Technology was founded in Boise in the early 1980s, Idaho’s second-largest economic driver has been technology companies, thanks to the low cost of living, high quality of life and educated talent pool.
  • Cleveland: A low cost of living and burgeoning downtown makes the Cleveland market attractive to tech startups. The city’s driving industries – healthcare and advanced manufacturing – are primed for disruption, suggesting we may see more innovative technology emerging from this Ohio market.
  • Dallas: With historic roots in semiconductors, telecom and defense, the Dallas-Fort Worth metropolitan area consistently ranks in the top 10 technology patent generators in the United States.
  • Detroit: In an effort to disrupt the ‘rusty’ automotive industry, companies such as Google and Ford are opening self-driving car research centers in Southeastern Michigan. Metro Detroit is also home to the University of Michigan, which focuses on software and technology development, establishing an ecosystem that will benefit the region for years to come.
  • Indianapolis: With major employers like Salesforce, Angie’s List and Interactive Intelligence, Indianapolis continues to attract college graduates and middle-age tech talent moving back from larger cities.

“Startups will find their sweet spot in markets where real estate costs and talent are still relatively affordable,” said Julia Georgules, Vice President and Director of U.S. Office Research for JLL. “While the usual suspects like San Francisco and Silicon Valley still hold clear advantages for established tech companies, cities that were once an afterthought now supply the elements to foster growth. These new locations boast cheaper and more abundant space, potential incentives, access to capital, a concentration of innovation and a deep talent pool.”

About the Technology Office Outlook Report

Since 2011, JLL has been following developments in the technology industry. The report helps technology companies make informed expansion decisions and provides insight for investors looking to find the next high-tech growth opportunity. This year, JLL’s research identifies which markets will be the most resilient across multiple economic cycles, in JLL’s proprietary Market Score tool.

More news, videos and research resources on JLL

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