Commercial real estate’s office sector has plenty of different tenant types. But right now, firms that specialize in technology are becoming increasingly the main tenants that landlords are targeting.
The more that consumers rely on technology, there is increased demand for office real estate in several locales. This used to be limited to areas such as Northern California’s Bay Area, Boston and the Austin, Texas area.
That has changed. Now several cities across the country are experiencing a boom in tech-tenant growth, which has created a boost in the creative-office movement. Furthermore, this is creating several opportunities for retrofitting older buildings to add needed Internet infrastructure. And another trend is the rise of co-working space for independent contractors, most of which are somehow related to the technology industry.
Included in these interesting developments, Spotify, the online music application, is reportedly looking for 350,000 square feet in New York City, to set up a headquarters there. In San Jose, Calif., major tech firms are looking for space within the proper city limits of the city because of a lack of available space in other parts of the Silicon Valley. Among them are big names, such as Apple, Google and eBay. In the middle of the country, Chicago is fast becoming a tech hub for startups. Civis Analytics, for one, recently leased space in the West Loop, and is hiring dozens of employees.
All of this bodes well for the commercial real estate industry, at least for now, since there is so much demand for space.
The only danger is when markets over invest in one business industry. Houston’s office market, for example, has collapsed, due to the decline in oil prices. If there was another tech crash, like there was at the beginning of this decade, then that would be a disaster for plenty of markets, especially San Francisco, where tech firms make up a majority of the office tenants in the city.
However, this is probably not going to be the case. Virtually every office tenant right now has a significant tech component to their business, and as consumers and companies increasingly rely on these products and services, there is bound to be office demand for space in locales across the country.