Phoenix ranks No. 2 in the nation for average annual growth rate in tech office leasing – a sector that is now the primary driver of the U.S. economic recovery, according to JLL’s latest research.
At the beginning of the pandemic, tech employment numbers declined, however losses were minimal by comparison to other industries. The sector has since made solid job gains with the largest technology companies leading the way. The top 25 technology companies by market capitalization added more than 600,000 workers from 2020 to 2021. Venture capital flows also reached record levels with $121 billion in funding nationwide from January through September 2021, and IPO activity achieved all-time highs during the same period.
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Between 2010 and 2020, Phoenix experienced a 27 percent average annual growth rate in U.S. tech office leasing – second only to Raleigh-Durham, which achieved a 33 percent growth rate.
“Most tech tenants want the absolute nicest projects in town. This has placed metro Phoenix’s newest and best Class A office spaces in high demand, with tech tenants often competing for occupancy,” said JLL Managing Director Ryan Bartos. “When it comes to tech, however, one size does not fit all. Companies who need flexibility can also lean on Phoenix’s large inventory of high-quality sublease space and spec office product. The breadth of options here is a characteristic that sets Phoenix apart, allowing companies to deal with return-to-work office scenarios in their own way as they expand to meet what seems like unending demand for their products.”
“COVID-19 has been an accelerant for trends we were seeing prior to the pandemic, leading to increased use and dependence on all things digital,” said JLL Research Director Alexander Quinn. “What’s interesting is that, despite society’s increased appetite for digital solutions and even their own statements on when they’ll return to the office, big tech has increased its physical office share, indicating that even the most digitally native companies see a value for physical collaboration opportunities.”
In fact, major tech companies secured a record 15.3 million square feet of office space since early 2020.
Over half of the leases signed in the U.S. since Q1 2020 are expansions or new to market transactions. The larger leases occurred primarily at locations with higher quality amenities and modern, efficient and sustainable work environments, which major tech companies hope will attract workers back to the office.
In Phoenix, Bartos points to new build projects like The Grove on the Camelback Corridor and 100 Mill and Watermark in downtown Tempe, as well as heavily amenitized renovated spaces like CASA in North Phoenix or The Alexander in downtown Chandler as projects attracting significant tech leasing interest.
Phoenix also remains a center of gravity for talent, generating from its strong educational institutions, high quality of life and creative environment, leading to growth opportunities for companies of all sizes