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Transfer Over San Francisco Bay Space. These Cities Had been House To The High Tech Leases In 2020

SEATTLE, WA – APRIL 6: The Seattle skyline is seen in Seattle, at sunset on April 6, 2020 … [+] Washington. The windows of the Hyatt Regency Hotel are heart-shaped. Washington State Governor Jay Inslee extended the home stay ordinance through May 4 to help slow the spread of the coronavirus (COVID-19). (Photo by Karen Ducey / Getty Images)

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According to a new report from CBRE, the tech industry was the most active industry in all of the US office rental business for the ninth year running in 2020.

This means that despite the fact that the COVID-19 pandemic resulted in almost every business move to remote work, tech companies continued to rent inks for office space.

While CBRE was unable to identify the individual leases (as most were signed under NDA and many are CBRE customers), the analysis revealed some interesting leasing trends. There were some notable differences in 2020 from previous years.

Perhaps the most interesting shift that has occurred over the past year, according to CBRE analysis, is the cities where the top tech leases were signed. For the first time since 2013 (the year CBRE began tracking those leases), San Francisco wasn’t number 1 on the list.

The San Francisco Bay Area fell by several jobs – from No. 1 in 2019 to No. 6 in 2020. This shows that more companies were unwilling to spend big bucks on renting office space in one of the most expensive office markets in the country invest, and be more open to setting up locations outside of traditional hubs.

Surprisingly to some, Seattle ranks first with 14 of the 100 largest leases for a total of 3.4 million square feet, up from 3rd place in 2019. Manhattan held second place with 8 leases totaling 1.8 million square feet 2020. Meanwhile, Washington, DC rose from 6th place to 3rd place last year thanks to 12 mega leases covering 1.8 million square feet, an increase of 72% over 2019.

Atlanta, Austin and San Diego were the top 10 markets for the first time in 2020, displacing Phoenix, Dallas / Ft. Worth and Nashville.

Markets with most square meters rented

100 largest US office rentals from technology companies in 2020

CBRE Research and CBRE Tech Insights Center

“It was encouraging to see many technology companies continue their workforce diversification strategies by expanding on the east coast (New York and Washington, DC) and south (Atlanta and Austin),” said Colin Yasukochi, executive director of the Tech Insights Center from CBRE.

Tech firms leasing more space overall outside of their main markets have also helped them get closer to talent-producing universities and cut labor costs compared to the Bay Area and Seattle, he added.

“It showed a commitment to move forward with these strategic plans despite the pandemic,” Yasukochi said.

Broken down by sector, software, e-commerce, and tech business service companies signed the top 100 tech office leases, accounting for 57% of all tech leases and averaging 149,000 square feet. That’s a significant decrease from an average of 251,000 square feet in 2019.

Tech sectors with the largest number of square meters leased

100 largest US office rentals from technology companies in 2020

CBRE Research and CBRE Tech Insights Center

“These roughly match the busiest sectors in tech office leasing in 2019, although search firms were more active in the top 100 than they were in 2020,” said Yasukochi.

Another notable trend? The tech industry recorded a smaller percentage of US office leases last year – 17% per square foot, compared to 21% in 2019. Overall, tech company office leasing declined 48% to total 26 million square feet in 2020 the largest company scaled back expansion plans.

While new rentals accounted for most of the largest US office rentals from tech companies last year, it’s noteworthy that renewals accounted for a quarter of the cumulative area of ​​the top 100 tech company office rentals. That is almost 43% more than 17.5% in 2019.

The growth in this share reflects trends in the broader office market as more and more companies choose to renovate while waiting for the economy and public health recovery from COVID to take off, according to CBRE.

According to Yasukochi, many of the key new deals prior to the pandemic were in the works.

“Some have been stopped because of uncertainty, others have evolved as part of longer-term strategic plans,” he added. “Tenants who closed these deals asked landlords for incentives – and many got them. This sometimes included lower rents or longer free rental periods, higher tenant improvement allowances, and greater flexibility in changing the length and size of their lease. “

Still, the numbers overall suggest the resilience of the technology, Yasukochi believes, as the sector continues to see strong demand for many of its products and services.

Looking ahead, Yasukochi said the pent-up demand for office space could be released later this year in the form of leasing activities that tech firms constrained and delayed during the pandemic.

“Many technology companies grew and continued to hire during the pandemic, which will result in a need for more office space over time, even as more remote work is done,” he added. “The pandemic has accelerated trends that are benefiting many of the largest tech companies, such as: These include increased use of e-commerce, digital productivity tools, social media, search, and streaming. This could represent a longer term growth story for the tech industry that will create real estate demand. “

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