Phoenix had the fourth-largest share of square footage in the 100 largest U.S. office leases by tech firms in 2019, according to a new report from CBRE’s Tech Insights Center. The metro claimed five of the 100 largest tech office leases in the U.S., totaling 1.3 million square feet.
“Tech companies are drawn to metro Phoenix’s growing workforce, favorable business environment and high quality of life,” said Kevin Calihan, Executive Vice President at CBRE in Phoenix. “There have been number of tech firms with existing operations in metro Phoenix that have chosen to grow their footprints and headcounts after having success in the market. This trend was evident in 2019 through a multitude of sizable lease expansions, including two over 300,000 square feet and several others between 132,000 and 243,000 square feet. As metro Phoenix continues to be one of the most desirable and affordable markets in the country, we’ll continue to see strong activity in the tech sector.”
CBRE’s analysis found that the software, search and e-commerce categories together accounted for 62 percent of the square footage in last year’s largest 100 tech office leases, up from a collective 41 percent share in 2018. The gains made by those three tech sectors came as large-scale leasing activity by companies involved in social media, hardware, business services, cloud and media & entertainment industries, lessened compared to previous years.
On the market level, the San Francisco Bay Area remained the capital of huge tech leases with 6.9 million sq. ft. newly leased last year, but its share of square footage in the largest 100 leases declined by 37 percent in 2019 from a year earlier as tech companies expanded to other markets, largely in search of talent. Meanwhile, square-footage gains registered in markets including Manhattan (up 148 percent), Seattle (up 63 percent), Washington, D.C. (up 37 percent) and Boston (up 2 percent).
Nashville and Phoenix entered the top 10 for 2019 after not making the cut in 2018.
“The largest tech firms have diversified their expansion plans so that they’re no longer overly dependent on one or two markets for hiring talent,” said Colin Yasukochi, Executive Director of CBRE’s Tech Insight Center. “Many East Coast markets like New York and Washington, D.C. offer large tech-talent labor pools and a steady flow of tech-degree graduates. Given the tight labor supply and cost pressures in the Bay Area and Seattle – the two largest U.S. tech markets – the diversification trend can be expected to continue.”