A new report from CBRE ranks the Washington D.C. region among the fastest-growing tech markets, with accelerations logged in both tech employment and rents for the area’s office space.
The D.C. region ranked 23rd in its growth rate for adding high-tech jobs and 11th in its growth rate for office rents, according to CBRE’s annual Tech-30 Report, which tracks the tech industry’s impact on office rents in 30 U.S. and Canadian markets.
In 2017 and 2018, the D.C. region added 11,281 new jobs in the high-tech software and services sector, representing a 6.4 percent job growth rate, according to CBRE. That compares with a 3.4 percent national average and marks an acceleration from the region’s 5.9 percent growth rate in the preceding two-year period.
Other markets in the Tech-30 reported job growth in the sector ranging from 29.5 percent (Vancouver, No. 1) to -10.7 percent (Indianapolis, Ind., No. 30). Vancouver was followed by San Francisco, Toronto, Seattle and Austin in rounding out the top five tech spots.
“D.C. has many tech jobs, but the rate of growth is not as fast as it is in other markets,” Meredith LaPier, executive vice president and member of CBRE’s Technology & Media Practice, told Commercial Observer. The D.C. area has the second-largest number of tech employees, with 188,130 workers as of 2018, among these markets—much greater than New York City’ 118,215 or Los Angeles’ 84,263—so slower growth is natural for a market of such size, according to LaPier.
CBRE categorized D.C. within its “high potential” category, alongside cities like Toronto, Salt Lake City and San Diego where tech companies are entering the market and boosting job growth.
“We forecast more growth in this sector in the coming years, especially as a broader ecosystem of tech matures in this market, and evolves towards consumer-facing technology; and beyond traditional IT, security and government-related tech services,” LaPier said.
In office rent growth, the D.C. region ranked 11th overall with office rents increasing 9.9 percent in the two-year period between the second quarters of 2017 and 2019. The figure marks an acceleration from the 4.3 percent increase seen in the preceding two-year period.
“The current state of D.C.’s tech market is strong and vibrant—and it’s continuing to strengthen,” LaPier said. “D.C. was a top tech market nationally before Amazon selected the city for its second headquarters. Amazon’s expansion over the next decade will bring many follow-on tech firms, and together with Virginia Tech’s commitment to a talent and incubation hub near Potomac Yard, the region will be further developing its local ecosystem of technology firms, talent and entrepreneurship.”
She credits the talent available with being the major driver of D.C.’s ranking in the report, as well as a strong transportation system with the Metro and affordable housing choices when compared to the San Francisco Bay Area and New York City.
“The D.C. region includes the most highly-educated workforce in the United States and is the sixth-largest [metropolitan statistical area] in the nation,” LaPier said. “It offers exactly what the big tech companies are seeking to satisfy their ambitious growth plans: large numbers of young, tech-savvy, educated people.”
According to LaPier, the area’s growth is a combination of two things—an emphasis on national defense and security at the federal level, which brings funds and jobs in the traditional government and contractor IT fields, and private-sector tech firms which looks to be close to the seat of government, and is impressed by the quality of talent located in the area.
The CBRE report also ranked submarkets within the Tech-30, with the Northern Virginia cities of Reston and Herndon ranking as a top-five tech submarket in North America.
The report noted that Reston and Dulles should continue to be strong in the years ahead, and Rosslyn, which has seen a significant number of technology start-up companies recently, also looks positive.
“With Amazon opening a second headquarters in National Landing, there will be continued growth in Arlington County,” LaPier said. “With available stock in the Rosslyn-Ballston corridor many emerging or relocating tech firms can find suitable space there.
“And, let’s not forget the District of Columbia itself,” she added. “Our own research finds that while the majority of new tech employees to the region still end up residing in Northern Virginia, about 20 percent of young tech workers moving here choose the District.”