Buoyed by robust tech-sector employment growth, Salt Lake City ranks first for office net absorption growth among the 30 leading tech markets in the nation, according to commercial real estate firm CBRE’s annual Tech-30 report, which measures the tech industry’s impact on office rents in the 30 leading tech markets in the U.S. and Canada.
Salt Lake City’s 11.4 percent growth in the third quarter was ahead of second-place Raleigh-Durham, North Carolina, which registered 7.9 percent growth. The rest of the top five included Silicon Valley, California (7.9 percent); Vancouver, Washington (7.1 percent); and Charlotte, North Carolina (5.8 percent).
Salt Lake’s high-tech employment grew 8.1 percent during 2016 and 2017, with office asking rents rising 9 percent from the second quarter of 2016 to the second quarter of 2018 to $23.96 per square foot. Salt Lake City’s combination of low office rents — particularly compared to primary markets like San Francisco and Seattle — and steady high-tech labor pool growth make it an attractive market for commercial real estate investors, according to the report. While many tech firms are willing to pay a significant premium for office space in leading tech submarkets — 13 percent more on average, according to the study — Salt Lake’s top tech submarket, the Utah and Salt Lake counties’ Tech Corridor, has just a 3.5 percent rent premium.
“Despite accounting for only 38 percent of the total suburban market size in both Salt Lake and Utah counties, the Tech Corridor has accounted for 67 percent of total net absorption since 2017,” said Nadia Letey, first vice president and office specialist at CBRE in Salt Lake City. “Large tenants are drawn to the area because of low costs, availability of new product and access to talent. Looking ahead, the overall tech market is expected to remain healthy; vacancy in the suburbs is in the single digits; and development — especially in the Tech Corridor — is strong, with two-thirds of new construction already pre-leased.”
The influence of tech job creation on office market growth is pervasive across the U.S. and Canada, with eight of the Tech-30 markets posting rent growth of 10 percent or more between the second quarters of 2016 and 2018, the report said. Office rents also increased in 26 of the 30 primary tech submarkets over the same period. Salt Lake City rents have experienced slightly more modest growth throughout this period, growing at 9 percent and ranking 12th on the list.