Tech Industry Drives Office Demand Recovery in Key Markets
The commercial real estate landscape is experiencing a resurgence in tech demand, particularly in markets with a high concentration of tech companies. After a slower initial return to the office post-pandemic, tech-related office demand is now accelerating, outpacing broader market trends as remote work begins to ease in this sector.
Tech Sector’s Unique Path to Recovery
While office demand rose by 67% across the board following initial vaccine rollouts in 2020, tech demand trailed, climbing only 55% as remote work policies remained strong. The subsequent rise in interest rates beginning in 2022 dampened office demand further, particularly in tech, where demand fell 38%, compared to a 15% drop in overall office demand.
However, several factors have contributed to a recent surge in tech sector demand. These include a softening labor market, declining interest rates, and an uptick in venture capital funding. Notably, tech demand began to recover in May 2023 and has since risen by 32%, outperforming the overall market’s 18% increase.
Key Markets Leading the Rebound
Data from VTS shows that markets with a significant tech presence are recovering faster than others, particularly in areas where tech companies have reemphasized in-person work. Cities like Silicon Valley, Boston, Seattle, and San Francisco are seeing the greatest uptick in demand. Tech giants such as Amazon, OpenAI, and Nvidia have announced renewed commitments to office-based work, and New York City’s tech demand has also seen a notable boost.
In these high-tech markets, the growth isn’t limited to tech-related sectors; total office demand is also climbing, indicating that a robust tech presence benefits the entire local economy. Markets with a tech concentration above the national average have seen annual growth of 36% in tech demand and 16% in total office demand, compared to 2% and 8% in markets with lower tech presence.
Top Cities for Tech Demand
Of the markets analyzed, Austin ranks first, with above-average scores across all metrics. Seattle’s eastern suburbs and Silicon Valley take the second and third spots, followed closely by San Francisco and Boston, all showing strong growth in tech and overall demand. New York City ranks sixth, driven by its significant tech demand volume and above-average tech growth rates.
At the other end of the spectrum, Washington D.C. and suburban Maryland rank lower, with more traditional industries leading demand in these areas. Nonetheless, even these cities host tech-focused submarkets that contribute positively to their local office demand.
Investing in the Tech Office Market
With the tech sector driving the office market’s recovery, investors are eyeing major U.S. cities with substantial tech industries for potential future allocations. As return-to-office trends gain traction, markets with a strong tech presence will likely continue to see growth in office demand, creating new opportunities for investors and strengthening local economies. This rebound in tech demand marks a promising outlook for commercial real estate, particularly in cities that have established themselves as tech hubs.
