The Effect of Tech/Creative Tenants on Office Leasing

The Effect of Tech/Creative Tenants on Office Leasing

The companies that are among the most prominent tech and creative companies in the world have had an impact on society so massive that it has never been seen until now. They have made a point of making sure that no one today can do without their products, and have improved the general quality of life for many people. Despite the incredible effect they’ve had on the world, at least three of today’s ten largest companies by market capitalization are relatively new. Amazon incorporated in 1994, and it’s actually the oldest of the three. Currently its the sixth largest company on the list. Next came Google in 1998, and it is number two in market capitalization. Facebook, the fifth on the list, came next in 2004. These businesses and others mark a new era of companies, and they have been at the forefront of drivers of rapid leasing activity. They are not only expanding in their primary markets, but also taking advantage of lower real-estate costs and spreading out to secondary markets.

Another indication of how fast things are changing among tech companies is the fact that most of the 162 private companies worth $1 billion or more reached that billion mark in the last three years or less. The oldest one made the list in 2009. These companies are listed on the CB Insights Unicorn List.

Firms that have shown up in the last twenty years have been leasing more office space as they’ve grown. They have had a profound impact on the leasing of office space. These creative and tech companies are defining trends in leasing, despite the prevalence of more traditional companies in the leasing market in the past, and they are beginning to affect other sectors. These companies are even taking Boston and New York by storm, despite the fact that historically the majority of their office spaces were leased by more traditional industries, even as other cities hosted more and more creative and tech companies.

As a result, the commercial real estate market is experiencing a boom. In 2015 the absorption figure reached the highest it had been in a decade, 86.7 million feet of absorption. On the other side, vacancy declined 70 basis points, falling to 12.5 percent from 2004 to 2005. The vacancy rate is the lowest it’s been since 2008. The majority of the change is due to Creative/ Tech companies. Salesforce.com leased 300,000 more square feet in New York. The building is to be renamed Salesforce Tower New York. Amazon went from 8.3 million square feet in the Silicon Valley and San Jose to another 11 million square feet in Seattle. Facebook also added another 275,000 square feet. According to experts, almost all of the net absorption of commercial leasing space has been due to the new Tech and Creative companies.

Creative companies and tech companies, companies mostly staffed by and strongly related to millennials, are taking the world by storm. They’ve had an exceptionally significant impact on the amount of office space leased, and it looks like they will continue to in the future.

Featured Image Credit: rawpixel / Pixabay

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