Utah Tech is booming and (by the way) creating real estate investing opportunities

By Kathleen McMillan

As anyone who has lived in the state for more than five years can attest, the Wasatch Front is transforming into a tech hub. Just drive south on I-15 and take a look at all the office development that has taken place in what is now dubbed “Silicon Slopes.” New buildings and cranes are seemingly ubiquitous. 

Strong attributes in our community underpin this growth; the greater Salt Lake City market rose seven slots on CBRE’s annual “Scoring Tech Talent” report, claiming the No. 15 spot. This report, which ranks 50 U.S. and Canadian markets according to their ability to attract and grow tech talent, shows Salt Lake City — which includes the Provo market area — as the highest-ranking small market in the publication (areas with a labor pool totaling less than 50,000 workers). Furthermore, the market is on the verge of becoming classified a large tech talent market.

CBRE ranks markets on its “Tech Talent Scorecard” based on 13 unique metrics, including tech talent supply, concentration, cost, completed tech degrees, industry outlook for job growth, and market outlook for both office and apartment rent cost growth. The top 10 cities in this year’s scorecard are all large markets with a tech labor pool of more than 60,000 people each, but Salt Lake City is close behind. Salt Lake’s jump in rankings is a measure of five-year growth and is primarily attributed to the city’s migration numbers and tech-company expansions.

While many have been touting the state’s tech-sector growth for years, this report offers some insight into exactly how the local tech market is performing, and what is contributing to that growth. It also gives a detailed comparison to other markets. Some of the growth factors that stood out for Salt Lake City are expanded upon below.

Talent Pool Growth

The report found that in the past five years, Salt Lake’s talent pool grew by 38.6 percent in a market where 5 percent of the total job pool is made up of tech jobs. This 38.6 percent growth rate represents an increase of 13,290 jobs from 2013-2018. To give some perspective, the labor pool for the United States only grew by 9 percent. Growth levels this high can deplete pools of qualified labor rapidly, which is why it is so vital that our natural growth and in-migration levels continue to remain elevated.

Young, Millennial Population

Salt Lake City ranked as the fifth-most concentrated 20-something market included in the report, as 22.7 percent of the area’s population is made up of 20-somethings. Salt Lake saw an 8.8 percent increase in millennial population growth between 2012 and 2017, which is substantial. To give some perspective, consider this: Millennials make up just 13.8 percent of the U.S. population.

In order to continue to grow at the levels we have been experiencing, our ability to attract talent into the state will be of great importance. In this regard, Silicon Slopes maintains some key advantages. Northern Utah’s relative affordability and access to recreation will aid the area’s ability to continue to attract a young, talented workforce.

Startup-Friendly Environment

For its size, the greater Salt Lake City market produces a high number of startups. Brigham Young University (BYU) is the top regional college when it comes to local startups. According to Pitchbook, 300 companies have been started by BYU alumni and these startups have raised $6.3 billion in venture capital. Some of the local companies that have been founded by alumni of BYU include Qualtrics, Elevance Renewable Science, Lendio and InsideSales.com, among others.

In addition, the University of Utah is responsible for producing the second-highest number of start-ups and is home to the recently completed Lassonde Studios, a facility whose sole focus is to house and foster entrepreneurship on campus and provide an environment for students to “Live. Create. Launch.”

It’s clear that the tech sector has had a significant effect on the local economy, but how has it impacted the local commercial real estate market? As previously mentioned, all one has to do to see the influence that tech has had on the commercial office market is to take a drive along I-15 — particularly near the Point of the Mountain. The majority of new development taking place in that area is driven by a variety of tech firms, and more growth is on the way. Podium announced an 80,000-square-foot expansion next to their Lehi headquarters, increasing its footprint just one year after signing their initial lease. Adobe also recently began construction on its second-phase expansion, which will add 160,000 square feet. 

In fact, 55 percent of all leasing that occurred during the second quarter of this year originated in the Tech Corridor, which includes the Utah County North and South, Sandy South Towne and Draper submarkets. This high level of activity has resulted in low vacancy rates, which has made new construction the best option for many companies searching for large blocks of contiguous space. Lease rates in the area are the highest they’ve ever been, construction continues, and with vacancy being as low as it is, the outlook for commercial property is bright.

Commercial real estate literally houses places of commerce. In many ways, the new buildings constructed along I-15 represent the structural changes to the area’s economy as tech firms supercharge economic growth. As Silicon Slopes continues to grow, you can expect to see more new buildings in the coming years. These new structures will continue to represent the growing importance and presence of tech in our community.

Kathleen McMillan is the marketing manager for the CBRE commercial real estate agency in Salt Lake City.