War on acquiring Tech Talent Driving up startups office rents
According to CBRE’s newly released Scoring Tech Talent Report, strong demand for key tech skills such as software development, hardware engineering and information security, coupled with a tight labor supply, is driving companies to locate in markets with the largest concentrations of high-quality talent like Northern California and Manhattan. And while value is a key driver when it comes to choosing an office location, companies are showing that they are willing to pay a premium to access the highest quality tech talent.
Overall cost variances from market to market are striking: Taking both talent and real estate costs into consideration, the “typical” U.S.-based, 500-person tech company needing 75,000 sq. ft. of office space can expect its total annual cost to range from $24 million in Vancouver, the least expensive of the 50 markets included in the CBRE report, to $57 million in the San Francisco Bay Area, the most expensive market.
According to CBRE’s analysis, which can be viewed in detail through the interactive Tech Talent Analyzer, the best-value markets with the highest quality of talent are Toronto and Vancouver (due in part to the strong U.S. dollar) followed by Indianapolis, Pittsburgh and Detroit.
“Since the cost of talent is the largest expense for most firms, the quality of that tech talent is becoming one of their most important considerations. The skills of the available labor pool do not appear to align with available jobs, causing a structural impediment to growth for companies across North America,” said Colin Yasukochi, director of research and analysis for CBRE in the San Francisco Bay Area.
“Only 37 percent of all tech-talent workers are employed in the high-tech industry, meaning tech companies must compete with other industries that employ the remaining 63 percent of tech workers. In addition, the unemployment rate for college-educated workers is around 2.3 percent in the U.S., further stiffening competition. All of this means that, more than ever before, top tech talent comes at a cost today,” he added.
Tech Talent Scorecard
Atlanta and Toronto are the big stories on this year’s Tech Talent Scorecard. Atlanta entered the top five for the first time along with traditional stalwarts like San Francisco Bay Area, Seattle, New York and Washington, D.C. Atlanta bumped Austin out of the top five, which fell back to number 8. Atlanta is one of the few large markets that maintained its fast pace of tech talent growth and has an accelerated forecast for future tech job creation, which elevated its position in the rankings.
Meanwhile, Toronto jumped a full six spots to number 6, from last year’s number 12. The elevated ranking was due to its talent employment base growing by the highest number of workers.
The rankings for the Tech Talent Scorecard are determined based on 13 unique metrics including tech talent supply, growth, concentration, cost, completed tech degrees, industry outlook for job growth, and market outlook for both office and apartment rent cost growth.