Change is inevitable. In all aspects of life, you can normally separate people, businesses, and ideas into two groups: those who are willing to embrace change and adapt to it, and those who refuse change and are soon forgotten. Culture is constantly changing, and I don’t think that has ever been more evident than in 2020.
In the eyes of many, commercial real estate has long been viewed as an industry run by stodgy old men in fancy suits. Slide decks and paperback deliverables have been the quintessential tools of the trade. I’m here to tell you that if you’re a broker in this industry and still have this mentality, you won’t make it very far. It’s time to change.
The Age of Technology
You can read article after article on the benefits of using CRE tech tools, but let’s put that aside for a minute. If you want to be successful in the tenant rep business, you need to be able to speak to the needs of your clients. If you want to grow your clientele, you need to be focused on the tech industry. Since 2010, over 1.5 million jobs have been created in the tech industry. High Tech’s share of total office using jobs has increased from 8% to 12% over that same time period.
If you want to look at more recent data, you can focus on the resiliency of the tech market during the COVID-19 Pandemic. Technology has obviously been essential to the work-from- home transition; think Zoom and Microsoft Teams. The Nasdaq, which is heavily comprised of technology securities, is up 15% over pre-pandemic levels. This success has led tech companies to expand their operations, resulting in more hiring. While this boom in employment has not yet translated to an increase in absorption due to work-from-home orders, that outcome is inevitable. According to a survey sent out by JLL to over two thousand office workers across the globe, 74% of the workforce said they want to work from the office in some capacity. As workplaces adapt to new systems and layouts, tech companies will be the first to scoop up trophy space left vacant by the pandemic.
Correlation of Rent Growth and Tech Job Growth
If you take a look at the markets with the top rent growth between 2018 and 2020, you’ll find they are markets experiencing large growth in the tech sector. Let’s check out the top five markets for rent growth over that time period:
- New York
- Silicon Valley
All five of these markets saw rent grow over 10% from 2018 to 2020. Now let’s look at another important metric that relates to opportunity: absorption. Here’s how the top five shake out:
In both rent growth and absorption, the top five players are made up of markets in what CBRE refers to as the “Tech-30”. Charlotte tops the list in both categories, so let’s analyze the Queen City. While traditionally seen as a finance hub, Charlotte experienced a 48% growth in its tech talent pool between 2013 and 2018. The market has experienced a 40% increase in office rental rates over that same time period. This correlation means that the opportunity for brokers to generate the highest revenues due to both volume and price comes in the tech sector.
While we are clearly living in unprecedented times, there is a light at the end of the tunnel, and that light shines brightest in the tech sector. With all the competition out there, you need to have an edge and you need to be able to connect with your clients. You need to talk the talk and walk the walk. Stay organized, stay in touch, and wow your tech clients with technology of your own. The new era is here, don’t get left behind.