TECH IMPACT: The Future of Office


Colliers International recently released their 2016 Spotlight Report, focused on the technology industry's impact on office space. Tech tenants are nothing new to natives and locals of Raleigh and the Triangle. With companies like Redhat, IBM, SAS, Citrix and others making huge splashes in the area for the past few decades, the technology industry's demand for office space in the Triangle has only increased.

What you will find different in this report is the notion of "New Tech" tenants, and how they are influencing the commercial real estate markets across the country.

Per the report, Colliers defines "New Tech" as those technology and e-commerce sales and marketing companies that have been founded in the past 20 years. This report summarizes the impacts that New Tech firms have had on rents, vacancies and net absorption.

Here's a few takeaways for your compass:

  • Net new space absorption in many of the nation’s leading office markets is largely being driven by New Tech firms. In contrast, the sectors that have traditionally dominated office leasing, such as finance, legal and publishing, are generally contracting. New Tech firms are increasingly dominating leasing activity for deals of at least 50,000 SF.

  • New Tech firms are expanding at a pace rarely seen before in other sectors, with many tenants growing from a 5,000 SF startup to a 100,000+ SF market mover in the matter of a few years. TripAdvisor, Brainshark, Care.com, Indeed and Invensys (now Schneider Electric), once just relatively unknown start-ups, are now major multi-market tenants.

  • A number of large tech firms own their office space. Millions of square feet occupied by Google, Amazon and Salesforce are owned, and therefore not reflected in net new space absorption. As a result, traditional methods of tracking absorption (i.e., leasing statistics) are missing a big driver in office demand.

  • The expansion of West Coast New Tech firms extending their footprint across the country presents an ongoing opportunity for landlords based in New York, Boston and Chicago plus secondary cities.

  • The impact of New Tech tenants is understated to the extent that most leasing statistics track total absorption, not net absorption. For example, if a company renews its lease for 800,000 SF (200,000 SF less than they had before) the entire 800,000 SF shows up in research statistics. Many New Tech tenants represent positive net absorption!

For more info and statistics, please check out the full Colliers 2016 Spotlight Report! As always, to keep you up to date on the latest industry trends and marketplace changes, keep using your Capital Compass for assistance!

- Capital Compass

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